The AFL-CIO Jobs and the Economy Forum - And How to Get Wall Street Under Control

Steve Novick

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.

  • Arthur Stamoulis (unverified)

    Great post. One thing I always like to point out during conversations like these is that Wall Street managed to "lock in" much of the financial deregulation of the '80s and '90s through the World Trade Organization's Financial Services Agreement -- including the repeal of Glass-Steagall, among many other things. The details of this are scary and almost never acknowledged. Check out Global Trade Watch's FSA page to learn more.

    The reason this matters moving forward is two-fold. First, many of the regulatory options we want Congress and the Obama administration to adopt could potentially be challenged through the WTO. Second, there's real question about whether or not the Obama administration is going to continue the Bush White House's policy of trying to expand financial deregulation through vehicles like the Korea Free Trade Agreement, the Trans-Pacific Partnership and the Doha Round of WTO negotiations.

    If the country ever gets serious about preventing banks from becoming "too big to fail" or about banning exotic financial products, we're going to have to address the financial service obligations written into our trade agreements.

  • Kurt Hagadakis (unverified)

    I was going to raise Arthur's point, on the last post you had on the subject, which should certainly set the tone for the debate. It's also relevant to state decrim laws, where international treaties create WOD obligations and definitions.

    It's hard to believe that we're just getting serious about this, when you can argue the horse has already bolted, and was hit by a truck.

  • Grant Schott (unverified)

    In a related issue, Congressman Michael Michaud, Democrat of Maine and former paper mill worker, is the lead sponsor of the “Trade Reform, Accountability, Development and Employment (TRADE) Act,” (H.R. 3012) .

    “The TRADE Act requires a review of existing trade pacts, including NAFTA, the WTO and other major pacts, and sets forth what must and must not be included in future trade pacts.

    For nearly four decades, even doing good economic times, we have seen an exodus of manufacturing jobs from the U.S. At the end of World War II, one third of Americans worked in factories. Today the figure is 10% with four fifths in services.

    Congressmen Peter DeFazio and David Wu are both original co-sponsors of the Trade Act. Senator Jeff Merkley announced his support four months ago. Congressman Kurt Schrader recently announced his opposition. I can find no record online of Congressmen Earl Blumenauer and Greg Walden or Senator Ron Wyden making a public statement on The Trade Act.

  • anon (unverified)

    "The banks mostly repaid the TARP money, didn’t they? Well, that’s true ..."

    Not. Less than 1/3rd of bailout has been repaid:

  • Kurt Chapman (unverified)

    Certainly not the funds given, erh ah loaned to GM and Chrysler......

  • Tim McCafferty (unverified)

    I suppose my situation certainly helps form my view of this article. I am familiar with the promotion of this legislative agenda that would tap the TARP fund. It's like the 'daily double' ticket Mom would find in Dad's wallet. The first time the old man ever hit one, and the wife's already got her hands on it.

    TARP is not free money. Though, in theory the banks are paying back TARP funds as fast as possible to avoid as much of the 5% interest. I want to know how the $41 billion for the funds administration will be paid for, as it's cost to the taxpayer after TARP is reimbursed. Why should TARP be paid for with more tax dollars, and not by the banks in the process of repaying the loans?

    I have great sympathy for the sentiment of taking money meant for the bailing out of the "master's of the universe," or Wall Street, I just think we are running from ourselves.

    I think we should tax and regulate the banks as we did in the mid 90's, and return to the narrow definition of a bank and what they may do with depositor's funds from before the deregulation of the early 80's. We were the strongest economy in every facet when we had the banks, and Wall Street firmly regulated, and taxed.

    I say we should make the TARP make money, and tax the top 2% tax brackets back to rates seen prior to '81, around 50% for corporations, and 70% for the top tax bracket. Just for 5years or until the budget is manageable, SSI is solvent, and Medicare is protected.

    I know it's not popular to say this, but the neo-cons started their ridiculous arguments of the anti-government party should govern and now it's the wisdom of the masses. I say the time is ripe to redefine the conversation, and make the argument in the context of real American Patriotism.

    I really don't believe the sacrifice of our military's blood and treasure should be spent in the glory of mult-national corporations positioning themselves to take taxpayer dollars while avoiding paying taxes. This mirror of obvious perversions are out for all to see, the pretense is gone, the corporations and rich have exposed themselves for what they really are.

    The Corporate Nanny State is the equivolent of a sailor jumping overboard tied to the anchor instead of the life preserver. The Wall Street whiners have arrogantly told us we are not smart enough to regulate them while they nearly bankrupted a nation lining their pockets with tax payer money!

    If the time is not ripe for a new tax revolt against the atrocity of corporate greed in the upcoming election, I shutter to think how far we must all fall until the moment comes.

  • rajeevmathur (unverified)



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