Thoughts On Wall Street

Wall Street’s reason for existence is to invest in our economy by providing start-up funding, equity, loans, and other forms of financing to the private sector.   Wall Street is supposed to be like economic fertilizer, spreading money around to promote growth.  If Wall Street makes good investments and helps the economy grow, it should profit.  If not, it shouldn’t.

Let's see how well Wall Street has done in fulfilling this mission.

• Over the last 15 years or so, Wall Street shifted its focus from financing growth to financing debt.  The results have included the explosive growth of consumer debt,  foreclosures, and ruined municipalities.  

 

• Wall Street has also institutionalized the idea that businesses minimize their labor costs by sending jobs overseas, busting unions, and layoffs.  It’s no mystery why the median wage in the U.S. has been essentially flat for about 30 years, and actually fell over the past decade.

• Wall Street is borrowing from the Fed basically for free, lending the Fed’s money back to the government through the purchase of bonds.  The bonds pay a higher interest rate than the Fed is charging, so Wall Street pockets the difference between the rates and touts its “profits” as evidence that the worst is over and there’s no need for regulations.

• Thanks to the recent actions of the S.E.C. against Goldman Sachs and this week’s hearings held by the Senate Permanent Subcommittee on Investigations, we’re learning more about the details and scope of the fraud and self-dealing that have become such central parts of doing business on Wall Street.  Investment banks put their own profits above the profits of their clients.  Fiduciary Responsibility?  What's that?

So Wall Street doesn’t spread money around, strengthen the economy, or profit from its growth.  Instead it takes money out of the economy in the form of 30% A.P.R. credit cards. It takes money out of the economy by foreclosing instead of refinancing underwater properties, driving home prices down.  It takes money out of the economy by shipping jobs overseas and taking mountains of government cash.  It profits by betting against the very mortgages it issued and by lending the Fed’s money to the Treasury while collecting the spread.  It profits by taking the wages of laid-off workers.  And it profits when its clients lose.

It's evident that Wall Street has failed miserably as an engine of growth.  Rather than being that engine, Wall Street has acted contrary to our economic and national interests in pursuit of its own profits.  It's time for it to stop.