Wall Street: the Real Roadblock to Economic Recovery
Monday, 11/2/2009 - 1:44 pm by Anna Burger | 6 Comments
After attending the Chicago bank protest, Anna Burger lays out a plan for how to build long-term economic progress.
President Obama’s bold leadership and the swift action by congressional leaders last spring likely staved off a global economic depression. Because of that work, our economy is on the path to growth and hundreds of thousands of jobs have been saved.
But we are not out of the woods yet. And when I think about what still needs to be done to build a true economic recovery, I think about workers such as Maria Guerra.
Maria is a janitor I met last week in Chicago. She worked hard to buy her own home and before the crash she co-signed a mortgage to help her brother buy a home for his family. Since then, Maria’s brother was laid off and his unemployment benefits have run out. Now, he has to choose between paying his mortgage and scraping up enough money to put food on the table.
The bank refuses to help them and Maria’s own economic security is in danger; she’s worried about losing her own home.
The sad truth is that nobody is spared from the impact of this recession. Some of us may still have our jobs or our homes but, like Maria, we all have a family member or friend barely getting by.
Congress must act on legislation recently introduced to extend unemployment benefits an additional 14 weeks to help workers like Maria’s brother. But it’s the architects of our current economic crisis-big banks and Wall Street-which continue to be the biggest roadblock to our recovery.
Big banks and Wall Street begged for trillions in taxpayer bailouts and backstops when they were on the verge of collapse. Now that they’re back on their feet, they are back to paying out billions in bonuses and clinging to the same failed policies that created the crisis in the first place.
Have the banks done anything to help families facing foreclosure? Have they increased lending to small businesses to create jobs? Have they helped states and cities close their giant budget shortfalls?
Not a chance.
That’s why Maria and I - and more than 5,000 other Americans from 20 states - converged on the American Bankers Association convention in Chicago. It was the largest mobilization since the economic crisis began to demand banks stop fighting reforms that would help protect our families from future crises. And it was the beginning of a national movement to hold banks and Wall Street accountable for their reckless behavior.
Big banks and Wall Street have spent decades rigging the system so that no matter what they win and workers lose and we must act now to break the hold they have over our economy.
To build long-term economic progress we must:
- Create a strong Consumer Financial Protection Agency to serve as a watchdog against predatory and reckless banking products;
- Crackdown on out of control executive pay that rewards short term risks over long term results;
- End too big to fail once and for all by separating commercial banking from investment banking and raising capital requirements back to levels that promote safe and sound banks;
- Empower shareholders to act on executive pay and break the excessive power of executive-controlled boards;
- Force banks to expand lending to small businesses and state and local governments to create jobs and save critical services;
- Demand banks stop foreclosures and help families keep their homes;
- Investigate, and if necessary prosecute, the big banks and Wall Street for crashing our economy.
- Our current crisis presents us with an historic opportunity to fundamentally change the way we value work and wealth in our country. The window to act is closing quickly but I know we are up to the challenge.
Roosevelt Institute Braintruster Anna Burger is chair of Change to Win, America’s newest labor federation, and a top-ranking officer at the Service Employees International Union.
Anna,
Thanks for personalizing what this economic crisis is doing to actual people like Maria instead of personifying the economy. Unlike others who write on this topic, your language implies the economy is a vehicle (roadblock, path to growth.)
This, I think, is a much more promising framing as it lends credence to the fundamental idea that the economy is something that must be “driven” — that is, externally controlled and isn’t self-regulating.
Great work in Chicago — let’s hope the message rang loud and clear.
Posted by Anat Shenker-Osorio | November 3rd, 2009 at 10:49 am
Anna,
I am not really sure you should be singing the praises of Obama and how he saved the economy from a depression. We are just in the first inning. The Obama administration showed its cards early on: the naming of Larry Summers and Tim Geithner to the lead its economic team. These are people who have been completely captured by Wall Street. The time for reform was six months ago- and what we got instead was a further consolidation in the banking industry and a massive transfer of taxpayer money to that industry.
Posted by John | November 6th, 2009 at 9:07 am
Anna concluded: “The window to act is closing quickly but I know we are up to the challenge.”
We the people are up to challenge, but unfortunately — as John remarked — that window of opportunity has already closed.
The points on your action list should already have been done or started. There’s now a draft CFPA, but all your other items are null and void!!
Obama even rewarded Bubblenanke — who is on the record as not understanding the impact of global imbalances and the importance for households of both a solid balance sheet as well as a healthy cash flow — with another term at the FED! This is reward for failure, exactly of the same type we have seen at Wall Street. Is this the change you can believe in that we the people voted for a year ago?!
Posted by carol | November 6th, 2009 at 10:06 am
These are all great recommendations, but no one in Washington has the guts to do any of it. Especially Democrats. The last 2 years of Democratic rule of Congress turned out to be a good preview of life under Obama. More of the same non-action, catering to a few nutjob Democrats(!) and bending over for big business to stick it to us all yet again.
Obama had us all believing things were going to be different. Joke is on all of us.
Posted by James | November 6th, 2009 at 11:57 am
Some good ideas above, but I don’t agree with “Forcing banks to expand lending to small businesses and state ……”
As RBS pointed out yesterday, “’Our customers are generally seeking to repair their balance sheets, not to increase borrowing. As a result, the demand for our lending is muted, especially from business customers”.
Had more stimulus gone to households and/or less to banks, households would be spending, thus more businesses would be hiring, plus these businesses would be seeking loans, which would have been justified because of strong order books.
Posted by Ralph Musgrave | November 6th, 2009 at 5:36 pm
I applaud your attendance at the Chicago demonstration against the bankers, and I completely agree that serious reform is needed … but I highly disagree on what type of reform it ought be. Your grasp of economics is apparently quite hazy.
Investigations out the wazzoo … YES!! (to include the political role in fostering the crisis).
But more gov’t rules & regs about what private businesses can/can’t do, pay, or offer is a horrible idea that only serves to empower politicians … which is why they (and you, of the SEIU)) are talking about it, of course.
Many gov’t meddlings were either direct or indirect contributory factors to the current fiasco:
– the three rating agencies that, when not faced with any competition due to gov’t regulations, saw where their revenue (bread) was buttered from (the wall st banks) and sold their reputations accordingly on all those mortgage bonds … not that a bad reputation matters, as they’re still gov’t protected, so kudos to them!
– Fannie & Freddie and their federally chartered mission of fostering “affordable housing”!?!? Need I say more?
– The SEC showed itself an utter lapdog, going so far as to allow Madoff to pull in more investors to his Ponzi due to their giving his operation a clean bill of health. While I applaud its mission, this agency needs a complete overhaul (and yes, better pay for examiners)
– Of course, the Federal Reserve merits a special place in this list, even though it is technically not part of the govt. Absurdly low interest rates were — and remain — the most destructive financial fuel-air explosive device in the gov’t arsenal. Gov’t (or Fed) directed interest rates can (and did) foster outrageous speculation and bubbles.
– Lastly, like Pavlov’s Dogs, the financial world was conditioned over the past 20 years of Fed / Treasury “policy responses” to think that they’d be saved no matter what horror hit their balance sheets. And our politicians proved them, for the most part, right.
The best cure for our economic maladies is to let the insolvent institutions fail, and wipe out the shareholders and render a large haircut to the bondholders. Our citizenry, private and public employees, misplaced its trust in gov’t and Wall St, and economic law (unfortunately, not the law of the land) calls for appropriately huge losses.
Sorry if large numbers of public pension funds (and SEIU pensions) are tied in to those losses; thems the ways the cookie crumbles.
Posted by Jeff Rosenberg | November 7th, 2009 at 4:28 pm