Friday, April 1, 2011

What has changed in the post-crash economy?

A few years ago we had to give banks money so that they wouldn't collapse and thus threaten to send the entire global economy into chaos. These banks and the entire financial industry had played a big part in causing the recession. So after giving them money, a lot of which was paid back, and having technically come out of the recession they helped cause how are things going with the economy and the financial industry now?

Last year CEO pay went up 27% while worker pay went up 2%. And in the financial sector, the 25 highest paid hedge fund managers earned $22 billion last year.

So things seem to be back on track for the rich and for most of the financial industry. But apparently it isn't enough. Bankers are still complaining about the financial regulations that were passed after the crash.

Jamie Dimon, chief executive of JPMorgan Chase, launched a broadside against financial regulation on Wednesday, warning that new capital rules could be “the nail in our coffin for big American banks”. [...]

Mr Dimon’s comments come as Wall Street executives and Republican members of Congress are starting to attack regulation as anger at the financial industry subsides. On Tuesday, Alan Greenspan, the former Federal Reserve chairman, wrote in the Financial Times that the Dodd-Frank financial reforms risked creating “the largest regulatory-induced market distortion since America’s ill-fated imposition of wage and price controls in 1971”.

Spencer Bachus, the Republican chairman of the House financial services committee, has said that regulators are there to “serve” the banks and warned the Treasury not to hurt Goldman Sachs’ shareholders when it writes new rules implementing Dodd-Frank.

Billionaires complain that things are too hard for them. All the while Wall Street is seeing record profits:

“But in the last quarter of 2010, the story was all about Wall Street. Profits actually decreased a bit at nonfinancial firms. But companies like investment banks and insurers saw profits climb to an annualized $426.5 billion.”

Republicans are doing all they can to stop the enforcement of those financial regulations at the same time that they didn't raise taxes on the rich, complain about a budget deficit that low taxes exacerbates, cut funding for things like Planned Parenthood and NPR that have basically zero impact on the deficit, and trying to bust unions.

All of this is happening while unemployment is still at 9%. The rich, and specifically the rich that make up the financial industry, are enjoying raises in their pay and record profits while the pay for everyone else is pretty stagnant and a big percentage of the country can't get a job. How is this acceptable the American people? How can they vote for a Republican party that wants this very thing to happen, for rich people to benefit while everyone else suffers or just stays the same?

Kevin Drum has some thoughts that sum up this whole situation:

It's only been two years since the Great Collapse, and finance industry profits have already rebounded to their bubble-era levels. That's a strong sign that finance industry leverage is also returning to its bubble-era levels, which in turn means the industry is about as dangerous as it's ever been. And Dodd-Frank is a notably weak piece of regulation, about as weak as any bill could be and still be called regulatory reform in the first place. Wall Street got off easy, and Dimon knows it.

Years ago I remember a lot of moderate liberals talking about how the Bush era radicalized them. For me, it was the economic collapse of 2008 that did it. The financial industry almost literally came within a hair's breadth of destroying the world, but even so it took only a few short months for them to close ranks with Republicans and the rich to prevent anything serious being done to rein them in. Profits are back up, new regulations are barely more than window dressing, nothing was done to help underwater homeowners, bonuses are as obscene as ever, unemployment remains sky high, and the public has somehow been convinced that this was all their own fault — or perhaps the fault of big government, or big deficits, or something. But the finance industry has escaped almost entirely unscathed. It's mind boggling. If this doesn't change your view of who really runs the world, I don't know what would.

To answer the question I posed in the title, I'd say very little has changed. And what has changed is being threatened by rich people who don't like it and Republicans who only care about the interests of those rich people. As Drum points out, don't confuse tea party rhetoric as being opposed to this situation. They are just rattling off their ridiculous anti-gov't involvement in things like TARP. They only care about the tax rates of rich people.

If the unemployed want jobs and the entirety of the working population that isn't rich want to get paid well they need to either get more involved or simply vote Democrat. Dems are beholden to some of the same entities that Reps are, which is why Drum calls the Dodd-Frank regulation weak. But Dems will at least give people a fighting chance. All Reps will do is work for the status quo. And once they secure that they will work for an even more unaccounted for financial industry and economy in general. Think back to the crisis of a few years ago and the problems that still persist today and ask yourself if that is something you want.

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