On Wednesday, the Oregon AFL-CIO, the Northwest Oregon Labor Council, and the national AFL-CIO held a forum on jobs and the economy in northeast Portland. We heard from Sam Rodgers, an unemployed steelworker; Dave Ruby, the owner of a small plumbing firm who has had to lay off workers; Carmen Gonzales, a farm worker who told us how many of her colleagues are working for less than minimum wage; Casey Currie, an unemployed veteran; and Melissa Crocker, a 2-1-1 emergency services worker. And we heard, especially from Ruby and Rodgers, about their struggles with the banking industry.
At the end of the forum, AFL-CIO President Tom Chamberlain outlined the jobs agenda: investment in infrastructure and energy efficiency; dedication of repaid TARP money to job creation; aid to state and local governments; extension of unemployment benefits. We called in to a number that recorded our messages to Wall Street. Jobs With Justice announced plans for an April 15 day of action, calling for a tax on Wall Street speculation.
Of course, bankers would argue that all of this anger at Wall Street is misplaced: The banks mostly repaid the TARP money, didn’t they? Well, that’s true – although people don’t know that, which is why using the repaid funds for job creation would serve double duty: It would put people to work, and let people know that the bailout wasn’t as disastrous as many feared, and still think.
But the TARP funds are just the tip of the iceberg of Wall Street’s debt to America. Wall Street manufactured the real estate bubble, developed and sold exotic financial instruments based on the bubble, and pocketed exorbitant interest and fees before the crash. They aren’t going to repay the interest and the fees. Wall Street got special tax treatment, with hedge fund managers getting special capital gains treatment for their enormous fees, even though they aren’t even risking their own money. (The fact that this tax break has not been eliminated is one of the great shames of this Democratic Congress).
In a recent New York Times magazine article, David Leonhardt put it very well:
Consider what has happened to the American economy over the last three decades. Highly leveraged financial firms became a dominant part of the economy. Their profits allowed the firms to recruit many of the country’s most sought-after employees — mathematicians, scientists, top college graduates and top former government officials. Yet many of those profits turned out to be ephemeral. So some of the best minds were devoted to devising ever-more-complex means of creating money out of thin air, the proceeds of which then drew in even more talent.
A more serious approach to regulation could, if indirectly, have a big impact on this situation. By reducing financial firms’ profits, it could reduce the industry to a smaller and arguably more natural size. Re-regulation could remove some of the subsidies that Wall Street now receives. The cottage industry of hidden fees, ballooning interest rates and other misleading practices could be brought under control. Higher capital requirements and a bank tax could force financial firms to experience the bad times as well as the good. Above all, re-regulation could acknowledge that modern finance brings both benefits and risks.
It is worth remembering that Wall Street’s long boom has not exactly been shared by much of the rest of the American economy. Wage growth for most workers has been painfully slow over the past three decades. Economic growth over the last decade was slower than in any decade since World War II. Surely, one goal of re-regulation should be to loosen Wall Street’s grip on the country’s resources, both financial and human, in the hope that they might be put to more productive use.