What’s good for Wall Street is bad for America
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To watch the Dow jockies on the teevee leaves one with the impression that Americans collectively win something when the industrial average rises above 10,000. But Americans don’t win anything. Most of them don’t even really understand what the 10,000 mark means, but they have learned to equate Wall Street winning with a booming American economy.
Do you earn a bonus when the Dow breaks 10,000? Does your job become more secure? Do your credit cards and medical bills disappear? Do your kids get college scholarships? Does the air you breathe become cleaner?
No, of course not. Americans don’t win anything when Wall Street prospers, and in fact, the opposite is usually true: what’s good for Wall Street is bad for America.
Pam Martens explains this “tails they win; heads you lose” philosophy:
Wall Street can and does make enormous profits on bets that share prices will decline (shorting), that companies will disappear (credit default swaps), that the economy will crater (interest rate swaps). And there’s a slogan on Wall Street: the trend is your friend. When it’s clear the bull is lying in the center of the ring (think Lehman’s death and the Merrill Lynch shotgun wedding on September 15, 2008), Wall Street moves its bets to the downside.
The market and its players have no conscience. There is no soul on Wall Street. The almighty dollar dictates everything, and so the boards of cash machines known commonly as “corporations” are legally obligated to their shareholders to make as much money as possible even if doing so demands engaging in things like shady lending practices that ultimately tank the entire US economy.
There is no government-provided incentive for Wall Street to behave morally. If the right players make tons of cash when they win, and shift the financial burden to taxpayers when they lose, why would they ever change their behavior? Wall Street makes crap, sells it to the public, and then when citizens get sicks, they’re responsible for their own medical bills.
Think: cigarettes, or as the FDA calls them, “nicotine delivery systems.” In 1995, Martens reminds us, the FDA told Americans that Big Tobacco was manipulating “nicotine delivery at each stage of production.” People were hooked on something that was killing them.
Insiders on Wall Street call their retail brokerage firms, now also dangerously merged with commercial banks, a “distribution” system. The investment banks create the toxic product, the brokers distribute it to the public under an enshrined carrot and stick system that is virtually identical at every major firm. That is, the internal research department puts out a buy recommendation. The brokers’ local manager holds a sales meeting and pushes the firm’s latest offerings. The brokers’ commission system dramatically favors risky products that the firm is pumping out over safer investments.
The reason the government must now create huge job programs is because the private sector has failed to provide for the masses. “According to the Labor Department, 9.3 million Americans could not find work as of January and millions more are involuntarily working part-time or too discouraged to look for work,” writes Martens.
So Wall Street corporations earn billions in profits racing to the bottom by slashing benefits and outsourcing American jobs overseas, while sheltering revenue in tax havens. Then, in the midst of failing to provide jobs to Americans, they ask for trillions more in taxpayer cash.
The suits provide nothing and ask for everything in return. Massive cojones, fellas.
Just in case anyone was worried President Obama may do the right thing and reinstate a Glass-Steagall wall between commercial and investment banks, fear not. Obama’s proposed bank curbs are “not a return to Glass-Steagall,” says the U.S. Treasury’s No. 2 official, Neal Wolin, who was also formerly general counsel to Lawrence Summers, a key proponent of repealing the Glass-Steagall Act during the Clinton administration.
No one has any intention of doing anything that will work. And you can quote them on that.
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This is a false distinction: at least half of the American public owns stocks. “Wall Street” is a synonym for “Main Street.”
With American wages stagnating – as they have been for decades – the best opportunity for Americans to get ahead is through stocks. They are democratic – populist even. It seems to me like putting more money in the pockets of most Americans is a worthy, egalitarian aim.
BTW. Why must you call Americans stupid?:
“But Americans don’t win anything. Most of them don’t even really understand what the 10,000 mark means, but they have learned to equate Wall Street winning with a booming American economy.”
Although it’s telling that you refer to Americans as “them.”
Yeah right ethan… you keep telling yourself that Wall St. = Main St. right along with what i’m sure are your other favorite mantras:
War is Peace – Freedom is Slavery – Ignorance is Strength.
Yeah the best way for Americans to get ahead is stocks, never mind that the majority of the middle class that does own any investments has just lost their shirts in the largest economic meltdown since 1929 that was created by Wall Street speculative titans in the first place.
What the fuck… did you get a degree from the Sarah Palin school of bullshit or what??
In response to another comment. See in context »Andy: you’re proving my point. The huge amount of Americans who own stocks took a beating because “Wall Street” took a beating. You are merely pointing out the Wall Street and Main Street are one and the same – the point I made in my original comment.
In response to another comment. See in context »THEN WHERE THE F@#K IS MY BONUS A$$H0LE
In response to another comment. See in context »Ethan – You really can’t compare average Americans’ meager stocks with, say, the portfolios of Wall Street high-rollers. A secretary at some massive WS firm would probably gladly cash in a significant chunk of stock for guaranteed healthcare. I think Americans too often think that regulation and reform threatens their chances of “striking it rich,” the lottery fantasy that is so uniquely American. That mythology that anyone can some day win The American Dream, I think, keeps a lot of individuals complacent.
It’s interesting how oftentimes Americans quickly run to defend the status quo, which in this case, is a financial system that favors very few individuals, while wealth disparity continues to grow.
I don’t think Americans are stupid, but the language of Wall Street is so prevalent that citizens have subconsciously begun to accept that What’s Good For Wall Street Is Good For The Nation. Why shouldn’t they accept that narrative? Their politicians say it and the media supports it. The fact that more of them are poor, jobless, and uninsured– while fewer people control more of the wealth every year– are all signs that the financial system is failing, but that’s still a tough pill to swallow when the Dow is portrayed as a national thermometer. Intelligence doesn’t factor into it. Propaganda compels even the most brilliant among us.
In response to another comment. See in context »Nice class warfare there. The rich are evil eh?
What I feel I and many others are defending is the opportunity and freedom to be successful. And not be punish for being productive. Government’s good intentions always lead to rewarding the least productive.
It would be ignorant to think that financial market systems favor few. The investment capital and bank loans is what allows businesses to invest in machinery and workers (aka jobs) which in turns allows businesses to be more efficient and sell their products cheaper and make more profit. Have you taken a business class?
Wealth disparity is nonsense. The total AGI of the middle class has grown faster than the rich. Check out IRS.gov. You can say the number of “rich” has doubled but so has middle class households. Except that equates to 10’s of thousands new rich people and millions of new middle class in 2 years. What it really shows is people moving up the social ladder. Yet you’re busy looking at the outlier data, distorting the real statistics.
“poor, jobless, and uninsured” – these are really signs that 80 years of government intervention is failing. A healthy wall street means a healthy market means more jobs. But as long at govt. distorts the market. we can never tell was healthy really is.
You need to learn the most fundamental rule of economics, government cannot create jobs without taking away jobs. Every penny the government spends is taken away from the private market. Whether it is a future job lost by higher taxes to pay debt interest or my retirement money being worth(-)less by the a de-valued dollar. Govt. cannot bend these rules.
In response to another comment. See in context »Ethan, when I read comments like this I don’t know whether to laugh or to vomit. You need to un-brainwash yourself.
http://lanekenworthy.net/2008/03/09/the-best-inequality-graph/
“The best opportunity for Americans to get ahead is through stocks. They are democratic – populist even. It seems to me like putting more money in the pockets of most Americans is a worthy, egalitarian aim.”
You must be joking, right? You think most americans get “ahead” via stocks? No, most americans can barely retire with stocks.
Let’s go deeper. Have you thought about what a stock really is, at its heart? You know it’s a share of ownership in a corporation. That you know. But what does that really mean? Well, let’s say you own stock in Wall-mart. You get a share of the profits Wall-Mart makes, right? If you have more money, you can buy more stocks, and therefore make more money by owning more of Wall-mart. Meanwhile, Wall-mart’s employees make the same terrible wage. No matter how much profit Wall-Mart makes, Wall-mart employees make that wage. Some might call it, wage slavery.
When you buy a stock, you are buying ownership of the fruits of the labor of other human beings. So no, stocks are not populist, and they sure as hell ain’t “egalatarian”.
The problem with modern-day capitalism is that in our system, money functions almost exactly like gravity – that is – greater concentrations of money in one location have a more powerful ability to attract more money.
That’s why the rich are getting richer, while the poor get poorer and the unemployment rate is at the highest its been since the great depression. That’s why the middle class is eroding.
It’s inevitable and will continue until we radically change the way capitalism functions.
In response to another comment. See in context »Yeah, fuck all the companies on the Dow! Fuck the people that work for those companies too! Because when stock prices are in the dumps is usually when companies do the most hiring.
“The almighty dollar dictates everything, and so the boards of cash machines known commonly as “corporations” are legally obligated to their shareholders to make as much money as possible even if doing so demands engaging in things like shady lending practices that ultimately tank the entire US economy.”
I’m assuming you have a bit more intelligence than this. This may happen in cases, but a blanket statement such as yours is just ignorant to the facts of business.
I’m not sure what part you’re disagreeing with. Surely, you know the corporation’s duty is to make as much money as possible. If you can find an exception to that rule i.e. a corporation sacrificing profits for the sake of polluting less (on its own, without government regulation supplementing self-regulation), then that corporation is out of business or falling behind in the race to the bottom.
In response to another comment. See in context »Allison,
There are a host of green mutual funds out there. I’m not going to list them all, but a cursory search will yield plenty. As far specific corporations there are plenty of companies converting to environmentally friendly practices, and this will continue as the technology gets cheaper. While the sole purpose of these changes is obviously not for a warm and fuzzy feeling in some CEO’s heart, there is obviously a cost-benefit scenario where things such as public opinions and future regulations come into play. The green discussion is one for another day.
That statement you made said, to me, that it is the requirement of a corporation–in fact any and all corporations–to maximize shareholder wealth at any cost, including tanking the economy. This is untrue, and I have to ask: if a corporation’s business plan includes tanking the economy, how does this create wealth for the shareholder? I understand CDS and the like (to the extent any of us can), but honestly, even the big firms are in a far more precarious situation today than they were three or four years ago.
My point is, the concept of maximization of shareholder wealth is a long term concept, and crashing the economy is not part of it. Some bad apples made some bad choices, yes, but this does not mean that all corporations are out to rape and pillage. Legally all corporations are NOT encouraged to “engag[e] in things like shady lending practices that ultimately tank the entire US economy.”
I’ve invested in shares of a local bank, which is traded publicly, on Wall Street. They aren’t an evil that is out to crash the economy, and if they did it would certainly not benefit me!
In response to another comment. See in context »The ONLY reason companies are going green is because they know they have to in order to stay competitive as the green movement gains momemtum. If that were to change tomorrow, you know damn well every single corporation would go right back to the ecosystem-destroying practices of the past century.
“if a corporation’s business plan includes tanking the economy, how does this create wealth for the shareholder?”
In response to another comment. See in context »Don’t twist her words. You know no business is deliberately trying to tank the economy. Her whole point was that the absurdly greedy (and risky) practices these corporations displayed are the reason our economy tanked. Take the Lehman brothers for example: Obviously they didn’t plan to go bankrupt, but it was bound to happen eventually given the the mind-boggling short-sightedness of this company’s leaders.
Again proving his point. The corporation is working in the interests of the consumer. If the majority of the consumers are interested in green policies, they’ll follow the consumer. Arguing the negative is just amateur.
In response to another comment. See in context »[...] This post was mentioned on Twitter by allisonkilkenny, allisonkilkenny, Art Brown, Art Brown, Ano Takashi and others. Ano Takashi said: RT @allisonkilkenny: Allison Kilkenny: What’s good for Wall Street is bad for America @ trueslant http://ow.ly/1om36V #p2 #economy (RT) [...]