Wall Street is recording record profits and, as noted by The Daily Kos, is partying like it’s the Roaring 20’s but for many Banks and the Middle Class, the real world is collapsing — unemployment is through the roof, wages are shrinking and consumers are still leery of spending money — and, as noted by the New York Times (NYT), the contrast between the immense good fortune of a few and the continuing suffering of all too many bodes ill for the future due to the fraud that has run rampant for the past several decades.
America has once again become the victim of a major financial slump created on Wall Street that is still resulting in the loss of many jobs. As a result of America’s slump, Goldman Sachs is making record profits and paying record bonuses. Since Wall Street was ‘bailed out’ by American taxpayers, nothing has been done to insure that the financial crisis doesn’t happen again or to stop any new fraudulent activities.
According to the NYT, it’s not a simple case of flourishing banks versus ailing workers: banks that are actually in the business of lending as opposed to trading, are still in trouble. Citigroup and Bank of America (BofA) are just a couple examples of banks that are now reporting losses.
Goldman Sachs made a lot of money and benefited greatly from a questionable bailout that put large sums of public money at risk — money that was used to bailout AIG and money that was used to extend many of Goldman’s extremely questionable betting practices and bonds.
More than a year after the bailout that has reaped all kinds of benefits and profit for Wall Street, there has been no attempt at serious reform, possibly because Wall Street has lobbied — with taxpayer dollars — ferociously to prevent any type of reform. Now the government may have waited too long to implement any meaningful reform.
We need to pass Serious, Effective Financial Reform
Wall Street’s trading operations have proven highly profitable again but the part of banking that matters — lending, which in turn fuels investment and job creation — is not. Key banks are still financially weak, which hurts the economy as a whole.
Once Citigroup and BofA announced surprise profits last quarter, the debate about injecting capital from taxpayers and temporarily nationalizing the most troubled banks fell to the wayside. Everyone was told that the banks were doing well since the banks were profitable again. It turns out — unsurprisingly — that all is not well and Citigroup and BofA announced losses in the third quarter. What happened?
It turns out that accounting procedures used to determine that the banks were okay weren’t exactly honest and the early profits reported by Citigroup and BofA were in part due to shady accounting. Main Street is once again being punished for Wall Street’s questionable misdeeds; broad economic distress and rising unemployment are leading to large losses on mortgage loans and credit cards.
Weaker banks are helping perpetuate economic distress as they remain reluctant to lend, and tight credit, especially for small businesses, is impeding the strong recovery needed to fix the crisis.
We need to pass serious, effective financial reform. Until we do, Wall Street will continue its risky — oftentimes illegal — betting to make big profits and it’s time to change that. The more Wall Street bets with everyone else’s money, the more Main Street and the rest of America loses.
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