The protest movement called Occupy Wall Street has struck a nerve. The demonstrators’ goals may be vague, but their grievances are very real.
If our country is to break out of this horrendous recession and create the millions of jobs we desperately need — if we are going to create a financially stable future — we must take a hard look at Wall Street and demand fundamental reforms.
I hope the protesters provide the spark that ignites that process.
The truth is that millions of Americans lost their jobs, their homes and their life savings because of the greed, recklessness and illegal behavior of Wall Street. Even Federal Reserve Chairman Ben Bernanke agreed when I questioned him at a Joint Economic Committee hearing that there was “excessive risk taking” by Wall Street. Bernanke also said the protesters “with some justification” hold the financial sector responsible for “getting us into this mess” and added, “I can’t blame them.”
The demonstrators and millions of sympathetic Americans understand that the odds are stacked in Wall Street’s favor because of the extraordinary economic and political clout of the big banks.
Believe it or not, the country’s six largest financial institutions (Bank of America Corp., CitiGroup Inc., JPMorgan Chase & Co., Wells Fargo & Co., Morgan Stanley and Goldman Sachs Group Inc.) have amassed assets equal to more than 60 percent of our gross domestic product. The four largest banks issue two-thirds of all credit cards, half of all mortgages and hold nearly 40 percent of all bank deposits.
Incredibly, after we bailed out the behemoth banks that were “too big to fail,” three out of the four are now even bigger than before the financial crisis.
Not only do these financial institutions have enormous economic clout, their wealth makes them an extremely potent political force.
From 1998 through 2008, in order to achieve their goal of repealing the Glass-Steagall Act and other financial regulations, they spent more than $5 billion on lobbying and campaign contributions. They also spent hundreds of millions of dollars to water down last year’s Dodd-Frank reform bill. After the law was passed, hundreds of millions of dollars more went toward repealing provisions and weakening regulations. They never give up.
Where do we go from here? How do we convert the protesters’ enthusiasm into concrete results?
For starters, we should break up the giant financial institutions. Left to their own selfish devices, Wall Street bankers will continue to gamble with other people’s money. Sooner or later, when their bets go wrong, they will come back to Congress asking to be bailed out again. Why not nip that in the bud?
There is also a sound economic argument against too few owning far too much. The idea that six giant financial institutions can exert such enormous control over the economy should frighten anyone who believes in a competitive free-market system.
Good Republican presidents such as William Howard Taft and Teddy Roosevelt broke up Standard Oil, the railroad trusts and other huge monopolies a century ago. Now is the time for us to end the financial oligarchy that has been so destructive to our economy. If a bank is too big to fail, it is too big to exist.