The following is an excellent excerpt from the book “OUR REVOLUTION: A Future You Can Believe In” by Bernie Sanders from Part Two: “An Agenda For a New America: How We Transform Our Country” from Chapter Three: “Ending a Rigged Economy” on page 296 and I quote: “REFORMING WALL STREET – Today the six major financial institutions in this country have almost $10 trillion in assets, equivalent to nearly 60 percent of our entire GDP. They issue more than two-thirds of all credit cards, underwrite more than 35 percent of all mortgages, hold 95 percent of all financial derivatives, and control more than 40 percent of all bank deposits. Meanwhile, their business model is based on fraud. It’s time for real Wall Street reform.
Greed, fraud, dishonesty, and arrogance. These are the words that best describe the reality of Wall Street today.
Fortunately, the American people are catching on. They understand that there is something profoundly wrong when a handful of billionaires on Wall Street wield extraordinary power and influence over the political and economic life of our country. They understand that Congress does not regulate Wall Street–it is Wall Street that regulates Congress.
And the reason for that is simple: Not a single industry in America has contributed more to congressional campaigns and political parties than the financial sector. None. Since the 1990s, the financial services industry has sent billions of dollars on lobbying and campaign contributions to get Congress to deregulate Wall Street, repeal the Glass-Steagall Act, and eliminate consumer protection laws.
They spent this money to get the government “off their backs,” promising to show the American people how much more innovative and efficient a deregulated financial sector would be. Well, they sure showed the American people. In 2008, Wall Street, the largest unregulated gambling casino in the history of the world, crashed and precipitated the worst financial crisis since the Great Depression. This crash caused incalculable harm to tens of millions of Americans and people throughout the world. In fact, Wall Street greed nearly destroyed the U.S. and global economies.
The 2008 Crash – As a result of the financial meltdown of 2008, more than 9 million American jobs were destroyed. Real unemployment skyrocketed to more than 17 percent, as more than 27 million workers were unemployed, underemployed, or had stopped looking for work altogether.
The American dream of homeownership turned into a nightmare of foreclosure for millions of households, as more and more people could not afford to pay their mortgages. This was bound to happen. For years, financial predators received fat commissions from lenders for steering Americans into the riskiest subprime mortgages imaginable–no documentation, no job, no income. . . no problem. And then, the banks bundled those mortgages, over and over again, into almost worthless and unregulated derivatives, until the house of cards collapsed.
By the time the dust settled, the housing meltdown had led to 15 million foreclosures and a huge spike in homelessness. And a third of the remaining homeowners were underwater–owing more on their mortgages than their homes were worth. It got so bad that thousands of Americans set up tent cities in Sacramento, Fresno, Tampa Bay, and Reno because they had no place else to live. Millions more lived in cars or on a friend’s couch.
As a result of the Wall Street crash, Americans lost more than $13 trillion in personal wealth–shattering retirement dreams, wiping out life savings, and making it impossible for families to afford to send their kids to college. And while the crisis caused enormous economic pain in every corner of the country, African-American and Latino families were hardest hit, because they were disproportionately targeted with subprime mortgages, many of which were designed to fail. It is no accident that minorities were 70 percent more likely to lose their homes to foreclosure than were white Americans. The ugly stain of racism manifests itself in many different ways in twenty-first-century America.
And because African-Americans and Latinos tended to have most of their wealth tied up in their homes, the total net worth of African-American households fell by more than 50 percent and by more than 65 percent for Latino families.
Today, nine years after the housing crisis began, 4.3 million homeowners still owe more than their houses are worth. Further, as a result of the ongoing housing crisis, more than a quarter of the nation’s 43 million renter households pay at least half of their incomes for housing, leaving precious little for other necessities like food and medicine.
What A Rigged Financial System Looks Like – Wall Street is the most powerful institution in this country, and the financial leaders there wield that power ferociously to protect their interests. As a result of the “revolving door” between Wall Street and the federal government, the needs and interests of the giant banks become converted into government policy. Not only does Wall Street have an endless supply of powerful people to lobby government, they hold key positions within the government–including two recent secretaries of the treasury from Goldman Sachs.
No matter how irresponsible their actions are, the financial titans always end up on top. Millions still suffer as a result of the Wall Street crash but the people in power who helped cause that disaster. While middle-class Americans lost their jobs, their homes, and their life savings, the people on top are doing phenomenally well. Here are just a few examples of people who were operating the levers of government and pushed policies that helped to create the Great Recession of 2008:
Robert Rubin. Robert Rubin stands out as the poster child for the revolving door that exists between Wall Street and Washington. Rubin started his career by making a fortune at Goldman Sachs, where he worked for twenty-six years, including two years as its co-chairman. In 1993, President Clinton appointed him head of the National Economic Council, and in 1995 he became treasury secretary. While in government he spearheaded financial deregulation, including the repeal of Glass-Steagall. He also prevented the regulation of derivatives.
In 1999, Rubin returned to Wall Street, and after brokering a deal with Republicans to legalize the $70 billion merger between Citicorp and Travelers Group, he was hired by the newly formed Citigroup and received about $15 million a year for his services.
Less than a decade later–a decade in which Rubin earned more than $126 million at Citigroup–taxpayers bailed out his megabank because of the enormous risks Rubin and others encouraged it to take. In 2010, the bipartisan Financial Crisis Inquiry Commission (FCIC) voted unanimously to refer Rubin to the Justice Department for “potential fraud” for misleading investors about Citigroup’s exposure to subprime mortgages.
When DOJ declined to act, Phil Angelides, chair of the FCIC, said, “It’s been a disappointment to me and others that the Justice Department has not pursued the potential wrongdoing by individuals identified in the matters we referred to them. At the very least, they owe the American people the reassurance that they conducted a thorough investigation of individuals who engaged in misconduct.” I couldn’t agree more.
Henry “Hank” Paulson. Like Rubin, a Democrat, Hank Paulson, who is a Republican, was a leader at Goldman Sachs. He was the CEO there from 1999 to 2006. While there he accumulated 4.5 million shares of Goldman stock, and in his last year he received a $45 million bonus. Under Paulson’s leadership, Goldman engaged in the kinds of reckless schemes that led to the financial crisis just a few years later.
After George W. Bush nominated Paulson to become treasury secretary in 2006, he had to sell his stocks to avoid a conflict of interest, netting about $600 million. As treasury secretary, Paulson repeatedly defended the deregulation of Wall Street, assuring Congress and the world that the markets were strong and the financial system stable. That is, until one day when he came before the Senate Democratic and Republican causes, handed us a three-page bill, and said that if we did not give him a $700 billion blank check within a few days, the entire financial system would collapse. The great defender of free market capitalism came to Congress for a bailout–and the largest welfare check in the history of the country.
At a meeting of the Democratic Caucus, I suggested to Paulson that he ask his banker and billionaire friends who benefited from the excesses of Wall Street, rather than middle-class taxpayers, to pick up the tab. Needless to say, Paulson disagreed.
Hank Paulson is now worth an estimated $700 million.
Tim Geithner. A Robert Rubin acolyte Geithner was president of the New York Federal Reserve between 2003 and 2009. In this position, he failed to ensure the safety and soundness of financial institutions before, during, and after the financial crisis. Instead of losing his job, Geithner was promoted by President Obama to treasury secretary, in which capacity he opposed strong efforts to regulate Wall Street, break up the banks, claw back executive bonuses, and protect underwater homeowners.
After leaving Treasury, Geithner landed a job as president of a multibillion-dollar hedge fund, where he received a generous line of credit from JPMorgan Chase, a bank that received over $400 billion in financial assistance from–you guessed it–the New York Fed and the Treasury Department.
Alan Greenspan. In my view, Alan Greenspan will go down in history as one of the worst chairman of the Federal Reserve. Future textbooks will refer to Greenspan as an example of how not to run a central bank. In order to underline the bipartisan support that Wall Street has in Congress, during its time of leadership at the Fed he was hailed not only by Republicans but also by most Democrats as “the Maestro.” This, despite his extremely conservative views, which called for, among other reactionary policies, the elimination of the minimum wage.
In 2000, at a House Financial Services Committee hearing on bank mergers, I asked Greenspan, “Aren’t you concerned that with such a growing concentration of wealth, if one of these huge institutions fails it will have a horrendous impact on the national and global economy?” Greenspan replied, “No, I’m not. I believe that the general growth in large institutions has occurred in the context of an underlying structure of markets in which many of the larger risks are dramatically–I should say, fully–hedged.”
Greenspan could not have been more wrong. Yet after leaving the Fed, he was hired to advise some of the biggest banks and wealthiest hedge fund managers in the world. He now has an estimated net worth of at least $10 million.
And on and on it goes.
And the Rich Get Richer – Median household income has gone down by $1,400 since 1999, but banks made a record-breaking profit of $164 billion in 2015 alone. The top twenty-five hedge fund managers made more in 2015 than the combined salaries of every kindergarten teacher in America, while paying a lower tax rate than most truck drivers or nurses.
Millions of Americans lost their homes and much of their wealth during the foreclosure crisis, but one edge fund manager alone made almost $4 billion on their economic pain by betting that the housing market would collapse.
While taxpayers provided over a trillion dollars in financial assistance to bail out Goldman Sachs and JPMorgan Chase, today the CEOs of these financial institutions are worth over $1 billion each. The reality is that Wall Street executives continue to receive huge compensation packages and bonuses, as if the financial crisis they created never happened.
The Business Model on Wall Street Is Fraud – It seems like every few weeks we read about a giant financial institution that has been fined or that has reached a settlement for illegal behavior. Some people believe this is an aberration–that we have an honest financial system in which, every now and then, a major institution does something wrong and gets caught. Unfortunately, the overwhelming evidence suggests otherwise.
The reality is that fraud is the business model on Wall Street. It is not the exception to the rule–it is the rule. And in the weak regulatory climate we have, Wall Street likely gets away with a lot more illegal behavior than we even know about.
How many times have we heard the myth that what Wall Street did may have been wrong but it wasn’t illegal? It is time to shatter that myth once and for all. Since 2009, major banks have been fined more than $200 billion for reckless, unfair, and deceptive activities.”
(THE CRASH OF 2008 WAS CAUSED WHEN BUSH-CHENEY LOWERED THE TOP INCOME TAX RATE TO 35%, STARTING TWO WARS NOT PAID FOR AND THEN NOT REGULATING THE BIG INVESTMENT BANKERS WHICH WERE THE MAIN CULPRIT OF THE HOUSING CRISIS BECAUSE THE BIG BANKS APPROVED MORTGAGES WITH NO MONEY DOWN. WHEN PRES GW BUSH ASKED TREAS SEC PAULSON “WERE THE BANKS REALLY IN THAT BAD OF SHAPE?” AND PAULSON SAID “YES,” PROVING PRES BUSH WASN’T RUNNING THE GOVERNMENT. THESE ARE THE ISSUES THAT MADE SEN BERNIE SANDERS A GREAT CANDIDATE TO RUN AGAINST HILLARY CLINTON FOR PRESIDENT WHICH HE ALMOST WON. MAYBE BERNIE SANDERS SHOULD EVEN BE CONSIDERED AS TIME MAGAZINE’S PERSON OF THE YEAR.
LaVern Isely, Progressive, Overtaxed, Independent Middle Class Taxpayer and Public Citizen Member and USAF Veteran