Bankers facing Chicago firestorm
'Enough is enough." "Bust up the big banks." "Too big to fail is too big to exist." All of this and more can be heard this week at the American Bankers Association. ABA conferences are usually pretty buttoned-down events. They feature seminars on investment strategies, young bankers exchanging cards and hoping to make contacts, and reports on lobbying and legislation.
This week, as the ABA gathers in Chicago, the bankers are being greeted by thousands of citizens calling them to account. On Monday, citizens marched to the offices of Goldman Sachs, demanding that it devote the staggering $23 billion it has put aside for bonuses into a fund to prevent home foreclosures. Today, thousands will gather to send the bankers the message: "Enough is enough."
People have every good right to be livid. First Wall Street engaged in an orgy of speculation that eventually collapsed. The losses threatened to plunge the economy into a global depression. George Bush, Federal Reserve Chair Ben Bernanke and Treasury Secretary Hank Paulson told Congress that they had to provide a $750 billion blank check for the banks to prevent a catastrophe. The money, they insisted, wasn't for Wall Street, but for Main Street to keep businesses running and people employed.
So Congress provided the money. The big banks pocketed billions directly, and billions more in indirect subsidies and guarantees. They now are emerging from the crisis bigger, more concentrated and with an explicit guarantee that they are too big to fail.
Immediately, they have gone back to making risky trades, ginning up the derivatives trades that were at the center of the collapse, and putting aside billions to pay themselves bonuses.
But while Wall Street was cashing in, Main Street was caving in. The banks still aren't making loans to businesses. Small businesses--a central generator of jobs--still find credit hard to find. The banks make money by risky trades, and gouging depositors and credit card holders with new fees and penalties. They can borrow at virtually zero percent interest from the Federal Reserve, invest in Treasury bonds and make money. They have no appetite for returning to the harder work of making loans to Main Street.
Foreclosures continue to rise. More than one in four homes with a mortgage is worth less than the mortgage and the percentage is rising. The banks have resisted renegotiating mortgages, writing down the debt and allowing people to stay in their homes.
President Obama says that we can't go back to an economy where finance captures 40 percent of the profits, but we're headed there right now. We can't go back to a concentrated banking system where bankers can gamble knowing they are too big to fail, where they pocket the winnings and taxpayers cover their losses, but we are there right now. We can't have spent trillions bailing out Wall Street while Main Street continues to crater--but that is where we are right now.
That's why citizens have to act. The showdown in Chicago at the American Bankers Association puts Congress, the administration and Wall Street on notice. We aren't going back to the old economy where banks cashed in and then stuck us with their losses when the bets went bad. We aren't spending taxpayers' money so that bankers can have million-dollar bonuses while small businesses can't get loans, families lose their homes and credit card holders get hit with new fees and higher interest rates. This isn't right--and in a democracy, people don't have to put up with it. The showdown in Chicago is the first--but surely not the last--expression of a righteous anger that will challenge the cozy politics of beltway lobbyists and Wall Street donors.