Working In These Times
Public Demands Tough Wall St. Reform. But Will Obama Cross the Line?
Perhaps with an ego as super-charged as his bank accounts—which grew by at least $9 million last year—Goldman-Sachs CEO Lloyd Blankfein describes pursuit of ever-larger profits as "doing "God's work."
Blankfein has also declared that new federal charges to rein in that greed "hurts America." Apparently, God has been instructing Blankfein to pile up more profits, and informed him that what's bad for Goldman-Sachs is bad for the entire nation.
For President Obama, Blankfein's delusions are a gift from the heavens, personifying what is wrong with an economy that generates such savage inequalities between the overclass and the insecure, anxiety-wracked majority.
Polling data, discussed below, shows that the banks are spectacularly unpopular after being bailed out. Further, the public--although not hitting the streets yet, perhaps out of defeatism--is very hungry for reforming how Wall Street operates. But the vital question is how aggressively will Obama play his strong hand. Will he take advantage of this moment? Or will Obama and the Democrats once again take the line of least resistance and water down the reform bill in order to avoid offending campaign donors, as they did on healthcare reform?
These are crucial issues, because so much is riding on the less-than-robust reform bills authored by Sen. Christopher Dodd and Rep. Barney Frank.
First, our government must do whatever it takes to protect its citizens against another financial Pearl Harbor Day like the Wall St. meltdown. We need maximum-strength reform that cuts out all loopholes for derivatives, re-instates Depression-era rules on speculation, and caps the size of banks now considered "too big to fail."
Ordinary hard-working taxpayers, meanwhile, have found themselves too small to matter much, and have been suffering through unemployment and home foreclosures.
Nomi Prins, author of It Takes A Pillage, describes at nation so polarized that it is hard to recognize this as the America we have known:
The top 25 hedge fund managers made a record $25.3 billion dollars in 2009. And despite all those dramatic congressional hearings, average compensation of Wall Street bankers rose by 27 percent in 2009…
On the other side of humanity, more sobering numbers include a record 2.8 million properties in foreclosure for 2009, a 21 percent increase over 2008's astonishingly high figure, with another 4.5 million foreclosures projected for 2010.
BANKS SITTING ON $1.2 TRILLION, NOT LENDING
In large part, the Great Recession is persisting because the bailed-out banks are not loaning out money to re-ignite the economy, despite all the bailouts from US taxpayers. Incredibly, the mega-banks are simply resting a huge chunk of their assets in interest-bearing accounts with the Federal Reserve.
"Today, banks are required to keep $63 billion in reserves, but have parked an extra $1.2 trillion at the Fed," Prins
A USA Today/American University study concluded that "banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn't get aid."
NEW MODEL OF GROWTH NEEDED
Second, we need to move toward what progressive economist William K. Tabb calls, "a different model of growth besides speculation and off-shoring of production." We've just endured a decade of virtually zero job growth in America, but the current direction of Wall Street and Corporate America suggest that's their game plan for the next decade as well.
Third, President Obama needs to use financial reform to convincingly demonstrate to the voters that his primary loyalty remains with Main Street, not Wall Street. Pollsters Michael Bocian and Andrew Baumann came up with some disturbing findings about the current mindset of the public toward Obama's administration:
Just 3 percent agreed that government’s policies helped “the average working person” or “you and your family.”
Our own recent poll for Democracy Corps found that a 46 percent plurality of voters think Obama and Democrats put bailing out Wall Street ahead of creating jobs for ordinary Americans.
IS OBAMA PAYING ATTENTION?
Obama would do well to consider these numbers, which show a distressing lack of public faith about where he and the Democrats truly stand when the chips are down, especially as they look toward the November elections.
But at the very same time, the public's intense feelings about financial reform are clear and intense. Like recent Gallup and Bloomberg polls showing that the public "despises" big banks, a strong reform message resonates powerfully with voters of all stripes, as Bocian and Bauman explain::
Our polling reveals that pro-reform messages generate intense responses among Democratic voters while also appealing to independents. …
Fully 90 percent of Democrats backed the measure, including 55 percent who did so strongly, while independents favored reform by a solid 55 to 45 percent margin. Even 39 percent of Republicans supported the bill….
Seventy-three percent of independents rated big banks unfavorably in a January poll of frontline Democratic and open-seat congressional districts conducted by Lake Research Partners for Accountable America.
HE WALKS THE LINE—BUT HE MUST CHOOSE
On Wall Street reform, all the polls suggest that good policy is good politics. We have a great chance to prevent another meltdown and more bailouts, and also begin to re-direct the economy in a productive direction.
But contrary to what President Obama declared at his Cooper Union speech yesterday, there is indeed a very sharp "dividing line" between Main Street and Wall Street, and it is reflected by the Administraton's reluctance to take firm stances on reform, as Art Levine points out.
The stakes are enormous and the political opportunity is great. But the president needs to decisively show on which side of that line he stands.