Last Friday, the House passed critical regulatory reform legislation aimed at preventing the recurrence of the kind of financial meltdown that devastated our economy at the end of the Bush Administration.
The lobbyists from Wall Street worked hand-in-glove with the Republicans, and a few Democrats, to try to kill the bill. Astoundingly, the Republicans argued that Wall Street should continue to be free to engage in the same reckless speculation that led directly to 10% unemployment and required the taxpayers to inject hundreds of billions into the markets so that the geniuses of private finance would not plunge us all into the abyss of another Great Depression.
With no regard for history - and here I mean the events of only 12 months ago - the Republicans and Big Banks have the audacity to contend that the creation of jobs and a growing economy requires the lowest levels of regulation and government involvement possible.
Here's a news flash: we tried it your way for eight years. The results: the lowest level of job creation of any eight-year period since World War II; all of the country's economic growth was siphoned off by the top 2% of the population and the financial sector; and the economy imploded. Sure - let's try that again.
The Republicans even had the brazenness to convene a convocation of 100 Wall Street lobbyists last Wednesday to plot how they could completely kill financial regulatory reform. They failed, largely due to the great work of Americans for Regulatory Reform, House Speaker Pelosi, Finance Chair Barney Frank and intensive lobbying from the Obama Administration.
They did manage to water down the House bill - but it still represents the most important move to re-regulate the out-of-control financial sector since the Great Depression.
Soon, Chris Dodd's Senate Banking Committee will report out the Senate's version of this measure and hopefully a bill will be on the President's desk early next year.
Financial reform is terrific politics for Democrats.
Americans United for Change released a new poll conducted by Anzalone Liszt Research that found broad support for regulatory reform aimed at reining in Wall Street. Among the key findings:
Overall, 70% of voters believe that the country's financial system needs either major reforms or a total overhaul.
When voters learn about President Obama's plan, support for specific changes increases dramatically. Once voters hear a description of the President's financial reform plan that focuses on increasing oversight over big banks, protecting consumers, and cracking down on corporate abuses, support rises by 25 points to 60%.
Independents are particularly receptive to the plan. Among Independents, the increase in support for the plan following the description was particularly large (31 points), leading them to support the plan by a 19-point margin (56% to 37%).
But financial regulatory reform, while necessary, is not sufficient to end the domination of the outsized financial sector on the American economy. The next step requires breaking up the giant Wall Street Banks that dominate our economy. Nothing less will do in order to create an even modestly competitive financial market place.
Let me relate a story that illustrates their massively inordinate market power.
A couple of weeks ago, I got a letter from CitiCorp informing me that they planned to raise the interest rate on my credit card from a really good 7.24% to 11.99% -- a big increase by two-thirds, or 4.75 percentage points. Since I never miss a payment, I called to complain - ultimately speaking to the service people in the office of CitiCorp's President in New York.
I was told that all CitiCorp customers would ultimately have their interest rates increased -- that as far as they knew I would have the lowest interest rate of any they would offer. In fact, the representative told me, people who had 15% rates had increases of up to 22 percentage points -- and that some customers would now be paying as much as 29.99%. That, of course, is getting into the range of your local neighborhood juice loan operator.
I pointed out that interest rates in the United States had not increased at all - much less by almost 5%. She said it was due to their "other costs." Then I noted that the material made available to their investors indicated that their overhead costs had actually dropped. "Other costs," she said.
Of course those other costs would be the losses they took on reckless speculative investments, and the increasing credit card default rate caused by the recession - for which CitiCorp, Goldman Sachs, Chase, Bank of America, AIG, and the other "masters of the universe" were mainly responsible.
Yet these very same banks - that caused the economic disaster - are all raising credit card interest rates to siphon tens of billions of dollars from the real economy of consumers and workers into the coffers of the financial sector.
How can they do this? Simple, there is no real competition in the credit card sector. The top three issuers control 52.82% of the market (JPMorgan Chase 21.22%, Bank of America 19.25% and CitiBank 12.35%). Add American Express (10.19%) and Capital One (6.95%) - and it becomes clear that five firms control almost 70% of American's credit card market.
Raising interest rates by 5% on the approximately $972 billion in outstanding credit card debt would transfer about $48 billion from the pockets of waitresses, file clerks, cab drivers, construction workers, teachers and firemen - the people who create America's wealth - into the pockets of Wall Street Bankers.
This is money that would otherwise be used to replace the broken TV, or pay for gas to get to work, or buy holiday gifts - to make the purchases that would create jobs and economic growth. What will Wall Street do with this money?
According to a report by New York Attorney General Andrew Cuomo, employees at nine banks that received money from the TARP bailout received a combined total of $32.6 billion in bonuses last year. As the Wall Street Journal reported, the bonuses included, " more than $1 million apiece to nearly 5,000 employees - despite huge losses that plunged the U.S. into economic turmoil."
Bloomberg News reported that: "The top 200 bonus recipients at JPMorgan Chase & Co. received $1.12 billion last year, while the top 200 at Goldman Sachs received $995 million. At Merrill Lynch, the top 149 received $858 million and at Morgan Stanley, the top 101 received $577 million. Those 650 people received a combined $3.55 billion, or an average of $5.46 million.
"JPMorgan Chase had 1,626 employees who received a bonus of at least $1 million last year, more than any other Wall Street firm," according to the report. "Goldman Sachs had 953 employees who received $1 million or more in bonuses, while Citigroup Inc. had 738, Merrill Lynch & Co., 696, and Morgan Stanley, 428. Bank of America Corp. had 172, while Wells Fargo & Co. had 62."
How do they get away with this? They do it -- as the old John Houseman ad for Smith Barney used to say -- "the old fashioned way." They do it the same way that the robber barons of the early 20th century did it before Teddy Roosevelt "busted the trusts." They control such huge percentages of the market that they can do pretty much what they want.
And of course they try to maintain their stranglehold on the market by spending a fortune on campaign contributions and lobbyists. President Obama reported in his Saturday radio address that the Banks had spent $300 million on lobbying Congress this year alone.
There is no economic rationale for allowing a few big private corporations to control America's financial markets. And we've just seen the outrageous outcome. When big banks are "too big to fail" because of the devastating impact of their collapse on the entire economy, taxpayers are forced to reach into their jeans and bail them out, so that they can go on making tens of billions of dollars in "bonuses" as compensation for their "financial genius."
There's something wrong with this picture. To put it succinctly: if a private institution is too big to fail, it's too big to exist.
Robert Creamer is a long-time political organizer and strategist, and author of the recent book: "Stand Up Straight: How Progressives Can Win," available on amazon.com.