By Les Leopold / Alternet
It was another year of Wall Street treachery. Those who took down our economy still have not been held accountable. Instead, Wall Street successfully lured the political establishment into a phony fiscal cliff/austerity debate. So instead of creating programs to put millions of Americans back to work, Washington is debating how much more to take away from the poor and the middleclass. Let’s take a closer look at the most disastrous economic events from 2012.
Here’s our countdown:
#10: The Romney Tax Returns:
Thank you Mitt Romney for alerting the public to what we already suspected: the super-rich pay lower rates than the rest of us (and yet, still have the nerve to complain that the government has too much debt!). Mitt’s tax returns showed how he could reduce his tax bite on $21 million of income in 2010 to only 13.9 percent by getting most of his income in the form of capital gains, and by stashing money overseas. His 2011 returns would have been even lower, but he realized he better up it a bit by volunteering to pay taxes on his sons’ $100 million trust funds. The net result was still a paltry 14.1 percent rate. It was also blatantly clear that had he not been running for president, he could stashed even more money in the Cayman Islands to bring his rates down to nearly zero. As the chart below shows, he’s not alone.
#9. Middle-Class Wealth declines by 35 percent
On July 18, 2012, the U.S. Bureau of the Census made it official: The middle-class is getting poorer. The median family — that family exactly at the mid-point of the wealth ladder — saw its net worth collapse. (Net worth is all assets minus all liabilities.) In 2005, the median family’s wealth was valued at $102,844 (in inflation adjusted dollars.) By 2010, the latest Census figures showed a drop of 35 percent to $66,740.
#8. The Fortune 400 increase their wealth by $200 Billion:
Meanwhile, the super-rich are flying even higher. This fall,Forbes Magazine was proud to report that the richest 400 Americans increased their wealth by a whopping $200,000,000,000 (that’s $200 billion), pumping up their collective wealth from $1,500,000,000,000 to $1,700,000,000,000 ($1.5 trillion to $1.7 trillion.)
How do we make sense of such obscene numbers?
- On average, the richest 400 Americans saw their wealth go up by an astounding $500 million eachin only one year — a bad year, no less, for the economy.
- Just this one year’s increase in wealth for the richest 400 is enough to hire approximately 5 million entry level teachers!
- All totaled, the 400 richest Americans have the same amount of wealth as approximately 25.5 million middle class families in the center of the wealth distribution.
- This is the new math of plutocracy: 400 super-rich = 25.5 million middle class.
#7. Bankers Rob Bank, but None Arrested:
The London Inter-bank Offered Rate (Libor) is the rate that the largest banks doing business in London (which includes all the big American banks) charge each other for overnight loans. It sets the basic interest rate on many adjustable loans associated with credit cards, adjustable mortgages and other commercial loans. It’s the most important interest rate in the world.
This year we learned the rate was being manipulated for fun and profit by the big banks who set it each day. By manipulating the Libor rates, the bankers could cash in on bets they were making on financial instruments that were sensitive to those rates. If they needed the rates to nudge up to win their bets, up it went. If the bet was on securities going down with Libor rates, down they would go. That’s exactly like a bookie fixing the biggest horse races in the world after it starts so that he can win his bets.
Who will be punished for this blatant financial crime? Bank after bank are in the process of admitting their sins, and then, paying a large fine. But it’s unlikely that any criminal bank will be forced to shut its doors, or that any American bankers will serve time or even get fined personally. The fines will be paid from profits, not from the personal accounts of the bankers. And the fines will be moderate because “prosecutors are trying to strike a balance between putting a company out of business and letting it off,” reports the New York Times. How considerate!
#6. Banks engage is massive Money Laundering for Drug Cartels and Rogue Nations: No one is punished.
Imagine what would happen to you if you got caught using your bank account to launder a million dollars for the world’s leading drug cartels. Imagine further that you found ways to illegally move money for rogue nations, which is prohibited by federal sanctions. If you’re very lucky, you might spend the rest of your life playing tennis with Bernie Madoff in a minimum security prison.
But wait. If you’re really interested in this line of work, it’s best to work for a too-big-to fail bank like HSBC. Because if you do, you can launder “at least $881 million in drug proceeds through the U.S. financial system,” the Justice Department announced in December. And you won’t lose your job or go to prison. You can even do “willful flouting of U.S. sanctions laws and regulations [that] resulted in the processing of hundreds of millions of dollars in….prohibited transactions” with rogue nations and even terrorist organizations.
(How blatant was this flouting? Because the drug cartels showed up so often at banks with hundreds of thousands of dollars in cash, the drug runners constructed special boxes to hold the cash so that it could easily slide under the bank tellers’ bars.)
Not to worry, if you’re caught, your employer will pay a fine, and you might have to wait five years to get some of your bonus money. But you’ve got your job, your income and your freedom. By the way, this month, HSBC was fined $1.9 billion, which amounts to approximately 5.5 weeks of its 2011 reported profits.
The Justice Department’s excuse for favoring these white-collar criminals? Putting the criminal bank out of business could destabilize the global banking system, kill jobs and cause another crash. What’s the excuse for letting the top officers off the hook? They didn’t have explicit knowledge of the crimes. (Yet they were laughing all the way to the bank, come bonus time.)
#5. In 2012, too-big-to-fail means too-big-to-be-punished.
Wall Street banks took down the economy by creating hundreds of billions of dollars of mortgage-backed securities that were toxic and often designed to fail. They knew that it was just a matter of time before mortgage foreclosures would destroy the value of those securities. Yet, all the largest U.S. banks packaged and sold toxic mortgages to investors all over the world, who were told these were sound investments. Sometimes the very same banks joined with hedge funds to profit by betting that the toxic securities would collapse. Meanwhile, they pumped up the housing market until it burst all over us.
Because of this fraudulent activity the entire economy crashed, killing 8 million jobs in a matter of months due to no fault of those displaced workers. It was the biggest, most corrupt and most profitable casino in human history. And now 2012 has passed without a single person responsible for the mess losing his or her job, or forfeiting their outrageous pay packages. As the New York Timesrecently reported:
“Regulators, prosecutors, investors and insurers have filed dozens of new claims against Bank of America, JP Morgan Chase, Wells Fargo, Citigroup and others, related to more than $1 trillion worth of securities backed by residential mortgages.”
The lawsuits and fines could cost the banks upwards to $300 billion. Fat chance. The big banks know that the authorities will shy away from severe penalties for fear of upsetting the economy.
#4. For the first time Wisconsin spends more on corrections than higher education:
Thanks to the Wall Street crash, state and local revenues plummeted for yet another year as tax revenues declined due to high unemployment and business failures. As a result the Milwaukee Journal Sentinal reported on August 16th, that ” Wisconsin state spending quietly hit a milestone: For the first time, the state budgeted more taxpayer dollars for prisons and correctional facilities than for the University of Wisconsin System. For 2011-’13, Gov. Scott Walker and GOP lawmakers allotted just under $2.1 billion to the state’s public universities and $2.25 billion to the Department of Corrections. It’s a gap that is unlikely to close any time soon.”
How sick is that? We’re filling our prisons up with those caught in the pathetic War on Drugs, even as money-laundering banker-criminals are allowed to roam free. At the same time we starve our higher educational institutions while our complex economy and democracy requires a more educated public. As the chart below clearly implies, our spending priorities are insane.
#3. As of November, 2012, 4,707,000 Americans have been unemployed for more than 26 weeks, and 21 % of all U.S. children live in poverty
The greatest calamity of the Wall Street crash is that four years later there still are over 20 million Americans without the full-time jobs they need. And 4.7 million of them have been out of work for over a half year, the most since the Great Depression. Little wonder that 21 percent of all children live in families who earn wages that total less than $23,350, the official poverty line.
How can this be happening in the richest country on Earth? The answer is simple. The super-rich are running away with our wealth. We have the worst income and wealth distributions in the world. No wonder our political leaders bail out Wall Street instead of putting our people back to work.
That sad truth is that the unemployment/poverty crisis could be solved rapidly. All we need to do to hire workers to rebuild our infrastructure and weatherize our homes and businesses. At the same time we should eliminate tuition at all public colleges and universities. The resulting building and educational boom would bring us back to full-employment in a hurry.
How do finance it? Make Wall Street pay for the damage it has done. Wall Street and Wall Street alone caused the financial crash and the ensuing unemployment crisis. A small financial transaction on their enormous casinos would finance the jobs and education programs we truly need.
#2. The Phony Fiscal Cliff Occupies America
2002 should be remembered as the year that the super-rich and their Washington lackeys manufactured a debt crisis in order to dismantle Medicare, Medicaid and Social Security. But there is no debt crisis. Government debt is high because the Wall Street crash drove up unemployment and reduced tax revenues. That coupled with the Bush tax cuts for the super-rich (and two unfunded wars) ran up public debt. But, if our people were at work, our debt would be shrinking rapidly as a percent of GDP. And even now, interest rates are at all time lows as investors all over the world want to put their money into dollars. Let us repeat: there is no debt crisis, no rising interest rates, no difficulty repaying our debt. Nada.
But billionaires like former private equity mogul, Peter Peterson, have spent hundreds of millions of dollars to convince us that we must tighten our belts (but not theirs.) So the austerity hysterics manufactured a fiscal cliff, one of the dumbest artificial constructions since the Tower of Babel.
To understand why these billionaires don’t want to see the Bush tax rates expire, let’s recall who really got all those tax cuts:
#1: Occupy Wall Street Disappears
The most important economic event of 2002 was the collapse of Occupy Wall Street as a mass phenomena. Because the crescendo against Wall Street’s power has abated, financial elites can rest easy that their wealth and power will continue to rise.
Let’s recall the ebb and flow of the economic debate before, during and after Occupy Wall Street.
In the summer of 2011, the entire national economic discourse centered on the need to cut debt and therefore “entitlements.” Pundits and politicians of all stripes couldn’t wait to make the poor suffer more by gutting the programs that serve them. After the Tea Party rise in the 2010 elections, the Obama administration offered a “Grand Bargain” to the Republicans that included cuts into Social Security, Medicare and Medicaid. Fortunately for the poor and the middle class, the Republicans stubbornly rejected it for fear it might help Obama’s re-election.
In the fall of 2011 Occupy Wall Street blossomed, and the press went wild over it. The 1 percent/99 percent framework became the new meme. The national discourse rapidly shifted away from phony austerity and back to where the debate belonged — how to get Wall Street to pay for the damage it had done.
It was a golden moment. It looked like a mass movement might emerge to take on the economic giants. Was this the beginning a modern populist movement that would threaten economic elites the way the Populist movement did in the late 19th century?
It didn’t happen — not yet.
What did occur is this: After the occupiers were removed from their encampments, the national discourse swung back to phony austerity, and Wall Street faded from view. Listen carefully to the current debate: Wall Street is not even mentioned during the fiscal cliff fiasco.
What’s the biggest lesson of 2012? Building a mass movement that targets Wall Street and the economic royalists is possible. But doing so requires more than creative spontaneous combustion. We need to learn how to structure and sustaina structured national movement that makes Wall Street pay for the damage it has done.
Have a happy, healthy…. and demonstrative 2013!!