The Dow Jones Industrial Average recently returned to 10,000—and Wall Street celebrated. At the same time, the nation’s unemployment rate climbed to almost 10 percent. (In my hometown of Detroit, it was more like 30 percent). The juxtaposition of those two figures—10,000 and 10 percent—was a moment of clear moral contradiction, and real moral clarity. The radical disconnect between Wall Street and Main Street was abundantly clear. A bad morality play was unfolding here, and when extravagant bonuses were announced for the top executives of the banks that Main Street taxpayers had so recently bailed out, an outraged nation was ready to change the script.
Just a year before, the financial collapse of Wall Street investment and commercial banks triggered this Great Recession. At breathtaking speed, the federal government moved quickly to bail out the biggest and richest financial giants in the economy. We were told they were “too big to fail” and, if they did, the rest of us would suffer greatly in an economic meltdown of apocalyptic proportions.
So we spent hundreds of billions of dollars to save the richest companies and people in America, offering them a safety net that we had long since decided not to grant to the poorest Americans, lest they “take advantage” of it. With few exceptions, Republicans and Democrats alike rushed to support this huge infusion of cash to Wall Street from the federal government. With our money, the banks were supposed to start lending again—which they had stopped doing—to credit-worthy businesses and homeowners for whom critical capital had dried up.
The American people were asked to trust the smart people who knew best and to count on the banks to restore the credit flow to individuals and small businesses that needed it. But some banks bought up (with our money) stocks, bonds, and other assets at rock-bottom prices and then made a killing in profits as the stock market stabilized and began to rise again. Then, to congratulate themselves for making a profit, they gave out record compensation bonuses to themselves while wages for the rest of the country continued to fall and more and more people found themselves without a job at all. It was a morality play almost too unbelievably bad to be true.
Banks were bailed out with billions of taxpayer dollars that we were told were absolutely essential to avoid a complete system failure—with few strings attached. While no one seemed to like the idea of bailing out those who had made the shortsighted decisions that precipitated our economic crash, we went along because, in a crisis, everyone needs to sacrifice. There is continued disagreement with the way the bailouts were designed (quite poorly), but a lot of smart people I respect still believe that doing something was necessary to save our country and the world financial system from a much greater crash. All of it, however, would have been much easier to take if those who had advocated most fervently for bailouts to return our financial system to the status quo were not the same ones who made millions from the status quo in the first place. To then learn that the money went to corporate profiteering, instead of supporting homeowners and small businesses, and resulted in record bonuses to the top financial managers—that was just too much to bear. Wall Street is having a party while the rest of the country makes sacrifices and does what is necessary to make it through. It is clear that this is immoral, and now the country needs to ask: Should it also be illegal?
I am aware, of course, of the conventional economic analysis that the stock market often comes back faster than jobs do, but those conventional rationales don’t adequately explain the phenomena we are seeing on Wall Street these days, nor do they acknowledge the moral failings here. The predominance of the paper economy over the productive economy was a root cause of this recession, and that preference is one of the core realities that must be changed. People with real jobs who do real work have to be the foundation of a healthy economy, not the speculative gamblers who just move our money around.
Yet anyone who questions whether these bonuses are actually deserved and if we, the taxpayers who financed them, should share in the profits is accused of being a “socialist” or a “communist.” CNBC Mad Money’s Jim Cramer, who always has a way with words, was asked what he thought about the divergence between Wall Street and Main Street, with the Dow at 10,000 and Main Street in shambles. His answer: “I went for a master ’s degree in Communism, and we learned about these things ... Lenin when he came in 1917 felt that the bankers were making too much money and he confiscated all their wealth. The peasantry felt terrific about it. The peasantry reacted positively ... It traced out well and the peasantry was rejoicing and the bankers—many of them were killed—and there was a terrific, terrific surge of opinion that Lenin was a great man.”
Cramer was suggesting that to question such Wall Street profiteering was to opt for the economic solutions of Lenin’s Soviet state. What a morality play this was becoming! Questioning billions in bonuses funded by taxpayer dollars while unemployment continues to climb is a matter of common sense, not a slippery slope to killing millions. Many people can now see through this false choice that we have been sold for so many years—that we must either accept this outrageous corporate behavior as a necessary component of capitalism, without complaint or action, or suffer the evil and oppression wrought upon the world by men like Lenin, Stalin, and Mao.
The anger that many Americans feel comes from a few different places, none of them Marxist. The first is that the behavior of the rich on Wall Street is an affront to our basic understanding of values such as commitment, integrity, fairness, and loyalty. We at least hoped there would be people in the financial industry who would take the opportunity given by the bailout to help rescue our country and the world from the brink of financial disaster, and not pay themselves millions in bonuses to do it.
We are surrounded by teachers, nurses, ordinary workers, small business owners, firefighters, police officers, and other public servants who are smart and talented, who work hard and make many sacrifices because they want to be contributing members of their society—working for more than just a paycheck. Of course they want to be compensated; of course they want to be rewarded for good work. But when times get tough, they don’t just walk away or demand millions in bonuses; they buckle down because it is the right thing to do. Teach For America today is harder to get into than many Ivy League colleges, not because it pays out millions in bonuses, but because there are so many young people who believe that motivation to do good work does not come solely from a salary.
As someone who has worked with the poorest of the poor in our country for most of my life, I get angry for another reason. For years I heard from legislators and television pundits that they would not support food stamps for the hungry, welfare for the poor, or housing for the homeless because poor people would just take advantage of it all. Even though fraud in food stamps and other government programs costs the American taxpayer only pennies a year, those arguments worked almost every time. Now, instead of a safety net for the poor and middle class in our country, we have one for some of the wealthiest people in the world, and one that costs us not pennies, but billions of dollars.
Let’s name some of the worst culprits. Goldman Sachs—which borrowed $10 billion from the U.S. government and later repaid it (with some of the windfall profits made from investing our tax dollars)—is on track, as I write, to pay out $23 billion in 2009 bonuses, twice what it paid in 2008. Consumer banks, while not involved in the same tricks as investment banks such as Goldman Sachs, have acted irresponsibly as well. Bank of America and Citigroup, which together accepted $90 billion in bailout funds in 2008, paid out $8.66 billion in bonuses. (Meanwhile, the average bank teller at Bank of America makes only $10.73 an hour—just over $22,000 a year.)
The time has come to say that some of those banks that were too big to fail have now become too immoral to succeed. We must move from not allowing them to fail to not allowing their failed behaviors to continue. It is time to consider taking our money out of the big banks that have continued this bad morality play and put it into community banks and credit unions to protect both our money and our integrity. Our ability to choose different banks, when we see those failures, is an important part of our market system working—perhaps it will also be a way to help change the behavior of the market as well.
But our personal actions are not enough—we need government to help rebalance the system. What has become clear in this bad morality play is that the ethos of Wall Street will not change from the inside. The arrogance and utter shamelessness of the Wall Street financial giants has been revealed—and in such a short time after their economic and moral collapse. It’s clear that Wall Street has learned nothing, wants to learn nothing, and instead just wants to go back to the same old behaviors.
Keeping true to his promise to reevaluate his previously held economic thinking with the changing reality of today, Alan Greenspan in October 2009 said, “If they’re too big to fail, they’re too big ... In 1911 we broke up Standard Oil—so what happened? The individual parts became more valuable than the whole. Maybe that’s what we need to do.” The government breakup of behemoth banks flies in the face of free-market fundamentalism, but now even Greenspan has become a proponent of this measure to find our balance again. Others have wondered if the government should step in and increase the liability of bank executives for the decisions that they make. It would allow them to be rewarded when their work pays off, but make sure they have skin in the game when their decisions turn out to be reckless. A balanced system might also need new regulations around the revolving door between government regulators and lobbying for the industry they are supposed to regulate.
The morality play continues. In the first six months of 2009, the financial services industry spent $223 million lobbying Congress to fight any additional regulation, restrictions, or requirements and was on track to more than double that spending for the rest of the year. While this kind of money being spent to fight fundamental public accountability is formidable, they have yet to render our democratic processes beyond repair. And now, more than ever, we must see to it that our democratic institutions are more responsive to the needs of real people than they are to the special-interest industry lobbies.
This will be a fundamental test of democracy in our time. Will we be a government “of the people, by the people, and for the people”? Or will we be a nation “of the money, by the money, and for the money”? The choices are becoming more clear. What is most clear now, in this bad morality play, is that the characters, roles, and story lines remain constant. But many in the audience have seen enough and believe it is time to change the script. This will take new commitments, new practices, and new disciplines—on all our parts.