Wall Street Congratulates Washington: A Job Well Done
by: Dean Baker,
t r u t h o u t: June 28, 2910
New York Times columnist Thomas Friedman is well known for pretentious
columns that consist of letters that he suggests some prominent person
write. I licensed Friedman's literary tool in order to present the following
letter from the Wall Street CEOs to the political leadership in Washington.
We want you know how much we value the support of the leadership of both
political parties in your efforts to ensure that we did not suffer from the
crisis that we ourselves created. As you recall, back in the fall of 2008,
our banks were flat on their backs. If you had not rushed to our rescue with
trillions of dollars in loans and guarantees from the Fed and the Treasury
at a time where no sane investor would talk to us, most of us would be among
the unemployed today. Instead, our banks are hugely profitable and we're
happy to say that bonuses are again hitting record highs.
While this is the sort of support that we expect in exchange for our
generous campaign contributions, we are especially impressed how you have
managed to so effectively blunt any backlash from the public. After all,
with the unemployment rate still near double-digit levels, millions of
people facing the loss of their homes and tens of millions seeing their
savings wiped out, there is naturally considerable anger. However, you have
managed to deftly deal with this problem by diverting their attention
Instead of people being angry at us for the billions that we are pocketing
while the economy is still in the tank, you have managed to make scapegoats
out of the unemployed. At a time when there are five unemployed workers for
every job opening, you have been able to whip up public resentment over
unemployment benefits that average $300 a week (a few minutes' pay for us).
This is truly skillful politics.
We were also impressed to see that you are taking steps to have the
government punish people who default on their mortgage loans to us. Just
because we are enormously rich and have huge banks doesn't mean that we know
what we are doing when we issue a mortgage. We didn't think about things
like the housing bubble when we issued a lot of those mortgages back in the
boom. As a result, we lost a lot of money. We stand to lose even more if
people keep defaulting - even when they are able to pay back our loans
(sometimes referred to as a "strategic default").
Therefore, we appreciate your actions to have the government punish
borrowers who default. By telling defaulters that they will not be able to
have future mortgages insured by the Department of Housing and Urban
Development or purchased by Fannie Mae, you are helping us squeeze more
money out of these homeowners. This must be especially difficult since we
know how much pressure there is on many of you to actually be helping the
homeowners. But you folks have had the courage to stand with us even as
foreclosures are continuing at a near record pace. We appreciate this.
And now, you have decided to put cuts to Social Security at the center of
your agenda. This really takes courage. Here is a program that people have
paid for with their taxes. This tax will be sufficient to fully fund
benefits for the next 33 years, according to the Congressional Budget
Office, and even after that date it could indefinitely pay more than 70
percent of scheduled benefits, assuming no changes are ever made to the
program. This means that current and near retirees have already paid for
their Social Security benefits.
But you're going to cut Social Security benefits anyhow. And this is even
after the collapse of the housing bubble and the resulting downturn wiped
out most of the housing equity of the baby boomers and much of the value of
their 401(k)s. Frankly, under the circumstances, we wouldn't have been
surprised if you were talking about increasing Social Security benefits.
But, we're absolutely delighted to see you moving forward with plans for
cuts. This will mean that we won't have to be taxed to repay the bonds held
by the trust fund.
And, of course, there is the financial reform bill. You killed any plans to
break up too big to fail banks (leaving us with huge government subsidies)
and kept any talk of a financial speculations tax from being taken
Keep up the great work; we'll remember you at campaign contribution time.
The Wall Street CEOs
Sticking the public with the bill for the bankers' crisis
How else can we interpret the G20 communiqué that includes not even a measly
tax on financial transactions?
By Naomi Klein
The Globe and Mail: June 28, 2010
My city feels like a crime scene and the criminals are all melting into the
night, fleeing the scene. No, I'm not talking about the kids in black who
smashed windows and burned cop cars on Saturday.
I'm talking about the heads of state who, on Sunday night, smashed social
safety nets and burned good jobs in the middle of a recession. Faced with
the effects of a crisis created by the world's wealthiest and most
privileged strata, they decided to stick the poorest and most vulnerable
people in their countries with the bill.
How else can we interpret the G20's final communiqué, which includes not
even a measly tax on banks or financial transactions, yet instructs
governments to slash their deficits in half by 2013. This is a huge and
shocking cut, and we should be very clear who will pay the price: students
who will see their public educations further deteriorate as their fees go
up; pensioners who will lose hard-earned benefits; public-sector workers
whose jobs will be eliminated. And the list goes on. These types of cuts
have already begun in many G20 countries including Canada, and they are
about to get a lot worse.
They are happening for a simple reason. When the G20 met in London in 2009,
at the height of the financial crisis, the leaders failed to band together
to regulate the financial sector so that this type of crisis would never
happen again. All we got was empty rhetoric, and an agreement to put
trillions of dollars in public monies on the table to shore up the banks
around the world. Meanwhile the U.S. government did little to keep people in
their homes and jobs, so in addition to hemorrhaging public money to save
the banks, the tax base collapsed, creating an entirely predictable debt and
At this weekend's summit, Prime Minister Stephen Harper convinced his fellow
leaders that it simply wouldn't be fair to punish those banks that behaved
well and did not create the crisis (despite the fact that Canada's highly
protected banks are consistently profitable and could easily absorb a tax).
Yet somehow these leaders had no such concerns about fairness when they
decided to punish blameless individuals for a crisis created by derivative
traders and absentee regulators.
Last week, The Globe and Mail published a fascinating article about the
origins of the G20. It turns out the entire concept was conceived in a
meeting back in 1999 between then finance minister Paul Martin and his U.S.
counterpart Lawrence Summers (itself interesting since Mr. Summers was at
that time playing a central role in creating the conditions for this
financial crisis - allowing a wave of bank consolidation and refusing to
The two men wanted to expand the G7, but only to countries they considered
strategic and safe. They needed to make a list but apparently they didn't
have paper handy. So, according to reporters John Ibbitson and Tara Perkins,
"the two men grabbed a brown manila envelope, put it on the table between
them, and began sketching the framework of a new world order." Thus was born
The story is a good reminder that history is shaped by human decisions, not
natural laws. Mr. Summers and Mr. Martin changed the world with the
decisions they scrawled on the back of that envelope. But there is nothing
to say that citizens of G20 countries need to take orders from this
Already, workers, pensioners and students have taken to the streets against
austerity measures in Italy, Germany, France, Spain and Greece, often
marching under the slogan: "We won't pay for your crisis." And they have
plenty of suggestions for how to raise revenues to meet their respective
Many are calling for a financial transaction tax that would slow down hot
money and raise new money for social programs and climate change. Others are
calling for steep taxes on polluters that would underwrite the cost of
dealing with the effects of climate change and moving away from fossil
fuels. And ending losing wars is always a good cost-saver.
The G20 is an ad hoc institution with none of the legitimacy of the United
Nations. Since it just tried to stick us with a huge bill for a crisis most
of us had no hand in creating, I say we take a cue from Mr. Martin and Mr.
Summers. Flip it over, and write on the back of the envelope: Return to
Naomi Klein is the author of The Shock Doctrine: The Rise of Disaster