Wall Street, which caused the economic crash that drove up the debt and gave politicians an excuse for this fiscal cliff debacle, is once again getting a free pass. Given Wall Street's greed, this should be a national disgrace. There is no debt crisis. Rather there is a crisis in courage — no one has the guts to make Wall Street pay for the damage it has done.
1. The Wall Street Crash Lies at the Heart of the Problem
Once again our politicians and pundits are showing signs of financial Alzheimer's. They just can't remember that Wall Street's insatiable greed caused the Great Crash of 2008 — not poor people buying homes, not the government's interference, not the auto-industry, not the debt. In a matter of months, 8 million American lost their jobs. Business and personal tax revenues plummeted, as expenditures rose to assist the unemployed. That's why deficits rose.
2. Wall Street Never Paid For the Bailouts
Finance is the bloodstream of capitalist production. The crash was like a heart attack, crippling the vital organs of the economy (and the saturated fats in the bloodstream were all those glutinous financial innovations). The bailouts and stimulus programs were designed to prevent the patient — the economy — from dying. Giving Wall Street all that money and debt guarantees should have been accompanied with immediate reforms, including removal and punishment of top management. Instead it was treated as part of the bonus pool for those who pushed the economy over the cliff. All that free money pushed up government deficits.
3. Wall Street Is Still Collecting Obscene Bonuses
While the rest of America suffers, Wall Street bonuses continue like nothing happened at all. Just look at this revolting chart below on Wall Street bonuses in New York. And total compensation is heading even higher according to recent reports:
New York State Comptroller Thomas DiNapoli reports that total compensation at Wall Street firms rose 4% last year to more than $60 billion, near pre-crash levels—and the third highest level ever.
Source: NY State Comptroller
Think about that for a moment: The folks who took down the economy and then got bailed out, are getting bonuses like they had nothing at all to do with the crash. And they are the first to call for "fiscal responsibility" and the cutting of "entitlements.
4: Wall Street Was Never Held Accountable
Not one Wall Street executive was indicted for crashing the economy. Sure, about 50 hedge fund honchos have been nailed for insider trading, but none of those trades had anything to do with the crash. Those who deliberately puffed up the housing bubble and who pedaled junk securities were not personally punished. Few even lost their jobs. Had they been running small banks instead of too-big-to-fail behemoths, the FDIC at least would have taken away their toys. Even the finance-friendly Reagan administration jailed over 1,000 savings-and-loan crooks.
5. Wall Street Hedge and Equity Funds Pay Only 15 Percent in Taxes on Their Incomes
All this talk about raising the top tax bracket from 35 percent to 39 percent is a joke for Wall Street, and a cruel one for the rest of us. That's because much of the trillion-dollar hedge fund and private equity syndicates pay themselves with something called "carried interest." Instead of getting an income, they get this special version of capital gains so that their income is capped at 15 percent. If this loophole isn't eliminated during these fiscal negotiations, you'll know that Wall Street owns both parties.
6. Wall Street Is the Only Industry Without a Sales Tax
Wall Street buys and sells trillions of dollars of stocks, bonds and derivatives each year. And none of those sales are taxed…unless they take place in London which has a financial transaction tax on stock sales (and it's been in place for the past 300 years or so).
I asked Tim Geithner, the Treasury Secretary, why we don't have one. Here's how a "Treasury Department official" responded on his behalf:
A financial transaction tax (FTT) is not an idea we are planning to support in the U.S.
FTTs are hard to implement globally, are generally borne by retail investors, are prone to regulatory arbitrage, depress asset prices and trading volumes, and increase capital costs.
The Obama Administration's Financial Crisis Responsibility Fee applies at the institutional level, levied as a tax on certain liabilities of large financial firms in order to discourage excessive leverage. This is fully consistent with the principles agreed to by the G-20 Leaders. In our view, a tax on liabilities is a better way to generate funding while addressing excessive leverage.
Not only would Geithner's proposed fee be minuscule, but guess what? That fee hasn't been implemented and was never even mentioned during the campaign. So Wall Street is still paying bupkis for the damage it has done.
7. If President Obama and the Democrats Had the Guts to Take on Wall Street, There Would Be No Need for Fiscal Cliff Debates
A small financial transaction tax on all of Wall Street's transactions — from stocks and bonds to every exotic instrument our greedy financial "engineers" dream up — could easily generate more than a trillion dollars of revenue over the next decade. Eliminate the vulgar carried interest loophole and you'll generate another $200 billion. Better yet, take some of that money to put our people back to work and to pay for our kids to go to public colleges tuition-free. Then you'll have an economic boom that will make our debt nearly vanish as a percent of GDP.
8. Making Wall Street Pay for the Damage It has Done Is an Easy Sell to the American People
Wall Street has got to be the most hated institution in the entire country — excepting Congress, of course. Nearly every American is furious about what financial elites get away with. There's a reason why Occupy Wall Street hit such a raw nerve. If the president went to the American people and said it was time to make Wall Street pay and sacrifice like the rest of us, he would ignite a tidal wave of support.
And if we had a progressive movement that could sustain a campaign for economic justice and Wall Street accountability, maybe, just maybe, we could force the president to do the right thing.
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