December 28, 2012 |
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It was another year of Wall Street treachery. Those who took down our economy
still have not been held accountable. Instead, Wall Street successfully lured
the political establishment into a phony fiscal cliff/austerity debate. So
instead of creating programs to put millions of Americans back to work,
Washington is debating how much more to take away from the poor and the
middleclass. Let's take a closer look at the most disastrous economic events
from 2012.
Here's our countdown:
#10: The Romney Tax Returns:
Thank you Mitt Romney for alerting the public to what we already suspected:
the super-rich pay lower rates than the rest of us (and yet, still have the
nerve to complain that the government has
too much debt!). Mitt's tax returns showed how he could
reduce his tax bite on $21 million of income in 2010 to only 13.9 percent by
getting most of his income in the form of capital gains, and by stashing money
overseas. His 2011 returns would have been even lower, but he realized he better
up it a bit by volunteering to pay taxes on his sons' $100 million trust funds.
The net result was still a paltry 14.1 percent rate. It was also blatantly
clear that had he not been running for president, he could stashed even more
money in the Cayman Islands to bring his rates down to nearly zero. As the
chart below shows, he's not alone.
#9. Middle-Class Wealth declines by 35 percent
On July 18, 2012, the U.S. Bureau of the Census made it official: The
middle-class is getting poorer. The median family -- that family exactly at the
mid-point of the wealth ladder --- saw its net worth collapse. (Net worth is
all assets minus all liabilities.) In 2005, the median family's wealth was
valued at $102,844 (in inflation adjusted dollars.) By 2010, the latest Census
figures showed a drop of 35 percent to $66,740.
#8. The Fortune 400 increase their wealth by $200
Billion:
Meanwhile, the super-rich are flying even higher.
This fall,
Forbes
Magazine was proud to report that the richest 400 Americans increased
their wealth by a whopping $200,000,000,000 (that's $200 billion), pumping up
their collective wealth from $1,500,000,000,000 to $1,700,000,000,000 ($1.5
trillion to $1.7 trillion.)
How do we make sense of such obscene numbers?
- On average, the richest 400 Americans saw their wealth go up by an
astounding $500 million eachin only one year -- a bad year, no less,
for the economy.
- Just this one year's increase in wealth for the richest 400 is enough to
hire approximately 5 million entry level teachers!
- All totaled, the 400 richest Americans have the same amount of wealth as
approximately 25.5 million middle class families in the center of the wealth
distribution.
- This is the new math of plutocracy: 400 super-rich = 25.5 million middle
class.
#7. Bankers Rob Bank, but None Arrested:
The London Inter-bank Offered Rate (Libor) is the rate that the largest banks
doing business in London (which includes all the big American banks) charge each
other for overnight loans. It sets the basic interest rate on many adjustable
loans associated with credit cards, adjustable mortgages and other
commercial loans. It's the most
important interest rate in the world.
This year we learned the rate was being manipulated for fun and profit by the
big banks who set it each day. By manipulating the Libor rates, the bankers
could cash in on bets they were making on financial instruments that were
sensitive to those rates. If they needed the rates to nudge up to win their
bets, up it went. If the bet was on securities going down with Libor rates, down
they would go. That's exactly like a bookie fixing the biggest horse races in
the world after it starts so that he can win his bets.
Who will be punished for this blatant financial
crime? Bank after bank are in the process of admitting their sins, and then,
paying a large fine. But it's unlikely that any criminal bank will be forced to
shut its doors, or that any American bankers will serve time or even get fined
personally. The fines will be paid from profits, not from the personal accounts
of the bankers. And the fines will be moderate because "prosecutors are trying
to strike a balance between putting a company out of business and letting it
off," reports the
New
York Times. How considerate!
Imagine what would happen to you if you got caught using your bank account to
launder a million dollars for the world's leading drug cartels. Imagine further
that you found ways to illegally move money for rogue nations, which is
prohibited by federal sanctions. If you're very lucky, you might spend the rest
of your life playing tennis with Bernie Madoff in a minimum security prison.
But wait. If you're really interested in this line
of work, it's best to work for a too-big-to fail bank like HSBC. Because if you
do, you can launder "at least $881 million in drug proceeds through the U.S.
financial system," the Justice Department
announced in
December. And you won't lose your job or go to prison. You can even do
"willful flouting of U.S. sanctions laws and regulations [that] resulted in the
processing of hundreds of millions of dollars in....prohibited transactions"
with rogue nations and even terrorist organizations.
(How blatant was this flouting? Because the drug cartels showed up so often
at banks with hundreds of thousands of dollars in cash, the drug runners
constructed special boxes to hold the cash so that it could easily slide under
the bank tellers' bars.)
Not to worry, if you're caught, your employer will pay a fine, and you might
have to wait five years to get some of your bonus money. But you've got your
job, your income and your freedom. By the way, this month, HSBC was fined $1.9
billion, which amounts to approximately 5.5 weeks of its 2011 reported profits.
The Justice Department's excuse for favoring these white-collar criminals?
Putting the criminal bank out of business could destabilize the global banking
system, kill jobs and cause another crash. What's the excuse for letting the top
officers off the hook? They didn't have explicit knowledge of the crimes. (Yet
they were laughing all the way to the bank, come bonus time.)
#5. In 2012, too-big-to-fail means
too-big-to-be-punished.
Wall Street banks took down the economy by creating hundreds of billions of
dollars of mortgage-backed securities that were toxic and often designed to
fail. They knew that it was just a matter of time before mortgage foreclosures
would destroy the value of those securities. Yet, all the largest U.S. banks
packaged and sold toxic mortgages to investors all over the world, who were told
these were sound investments. Sometimes the very same banks joined with hedge
funds to profit by betting that the toxic securities would collapse. Meanwhile,
they pumped up the housing market until it burst all over us.
Because of this fraudulent activity the entire
economy crashed, killing 8 million jobs in a matter of months due to no fault of
those displaced workers. It was the biggest, most corrupt and most profitable
casino in human history. And now 2012 has passed without a single person
responsible for the mess losing his or her job, or forfeiting their outrageous
pay packages. As the New York Times
recently
reported:
"Regulators, prosecutors, investors and insurers have filed dozens of new
claims against Bank of America, JP Morgan Chase, Wells Fargo, Citigroup and
others, related to more than $1 trillion worth of securities backed
by residential mortgages."
The lawsuits and fines could cost the banks upwards to $300 billion. Fat
chance. The big banks know that the authorities will shy away from severe
penalties for fear of upsetting the economy.
#4. For the first time Wisconsin spends more on corrections than
higher education:
Thanks to the Wall Street crash, state and local
revenues plummeted for yet another year as tax revenues declined due to high
unemployment and business failures. As a result the
Milwaukee
Journal Sentinal reported on August 16th, that " Wisconsin state
spending quietly hit a milestone: For the first time, the state budgeted more
taxpayer dollars for prisons and correctional facilities than for the University
of Wisconsin System. For 2011-'13, Gov. Scott Walker and GOP lawmakers allotted
just under $2.1 billion to the state's public universities and $2.25 billion to
the Department of Corrections. It's a gap that is unlikely to close any time
soon."
How sick is that? We're filling our prisons up with those caught in the
pathetic War on Drugs, even as money-laundering banker-criminals are allowed to
roam free. At the same time we starve our higher educational institutions while
our complex economy and democracy requires a more educated public. As the chart
below clearly implies, our spending priorities are insane.
#3. As of November, 2012, 4,707,000 Americans have been unemployed
for more than 26 weeks, and 21 % of all U.S. children live in
poverty
The greatest calamity of the Wall Street crash is that four years later there
still are over 20 million Americans without the full-time jobs they need. And
4.7 million of them have been out of work for over a half year, the most since
the Great Depression. Little wonder that 21 percent of all children live in
families who earn wages that total less than $23,350, the official poverty
line.
How can this be happening in the richest country on Earth? The answer is
simple. The super-rich are running away with our wealth. We have the worst
income and wealth distributions in the world. No wonder our political leaders
bail out Wall Street instead of putting our people back to work.
That sad truth is that the unemployment/poverty crisis could be solved
rapidly. All we need to do to hire workers to rebuild our infrastructure and
weatherize our homes and businesses. At the same time we should eliminate
tuition at all public colleges and universities. The resulting building and
educational boom would bring us back to full-employment in a hurry.
How do finance it? Make Wall Street pay for the damage it has done. Wall
Street and Wall Street alone caused the financial crash and the ensuing
unemployment crisis. A small financial transaction on their enormous casinos
would finance the jobs and education programs we truly need.
#2. The Phony Fiscal Cliff Occupies America
2002 should be remembered as the year that the super-rich and their
Washington lackeys manufactured a debt crisis in order to dismantle Medicare,
Medicaid and Social Security. But there is no debt crisis. Government debt is
high because the Wall Street crash drove up unemployment and reduced tax
revenues. That coupled with the Bush tax cuts for the super-rich (and two
unfunded wars) ran up public debt. But, if our people were at work, our debt
would be shrinking rapidly as a percent of GDP. And even now, interest rates are
at all time lows as investors all over the world want to put their money into
dollars. Let us repeat: there is no debt crisis, no rising interest rates, no
difficulty repaying our debt. Nada.
But billionaires like former private equity mogul, Peter Peterson, have spent
hundreds of millions of dollars to convince us that we must tighten our belts
(but not theirs.) So the austerity hysterics manufactured a fiscal cliff, one
of the dumbest artificial constructions since the Tower of Babel.
To understand why these billionaires don't want to see the Bush tax rates
expire, let's recall who really got all those tax cuts:
#1: Occupy Wall Street Disappears
The most important economic event of 2002 was the collapse of Occupy Wall
Street as a mass phenomena. Because the crescendo against Wall Street's power
has abated, financial elites can rest easy that their wealth and power will
continue to rise.
Let's recall the ebb and flow of the economic debate before, during and after
Occupy Wall Street.
In the summer of 2011, the entire national economic discourse centered on the
need to cut debt and therefore "entitlements." Pundits and politicians of all
stripes couldn't wait to make the poor suffer more by gutting the programs that
serve them. After the Tea Party rise in the 2010 elections, the Obama
administration offered a "Grand Bargain" to the Republicans that included cuts
into Social Security, Medicare and Medicaid. Fortunately for the poor and the
middle class, the Republicans stubbornly rejected it for fear it might help
Obama's re-election.
In the fall of 2011 Occupy Wall Street blossomed, and the press went wild
over it. The 1 percent/99 percent framework became the new meme. The national
discourse rapidly shifted away from phony austerity and back to where the debate
belonged -- how to get Wall Street to pay for the damage it had done.
It was a golden moment. It looked like a mass movement might emerge to take
on the economic giants. Was this the beginning a modern populist movement that
would threaten economic elites the way the Populist movement did in the late
19th century?
It didn't happen -- not yet.
What did occur is this: After the occupiers were removed from their
encampments, the national discourse swung back to phony austerity, and Wall
Street faded from view. Listen carefully to the current debate: Wall Street is
not even mentioned during the fiscal cliff fiasco.
What's the biggest lesson of 2012? Building a mass movement that targets Wall
Street and the economic royalists is possible. But doing so requires more than
creative spontaneous combustion. We need to learn how to structure and
sustain a structured national movement that makes Wall Street pay for
the damage it has done.
Have a happy, healthy.... and demonstrative 2013!!
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