One of the more prevalent half-truths of living in the USA these days is that what is good for Wall Street is good for all of us. It is a variation of the old “what is good for GM…” and, like its predecessor, it is equally fallacious. One need only look at the past 6 years to see that a booming market with unprecedented profits doesn’t translate to more jobs, let alone wealth trickling down. In fact, the truth is quite the opposite.
Much of the wealth generated on Wall Street is in the financial sectors, with banks and other financial institutions generating the majority of wealth, primarily due to a system that has been rigged by the government. The result is something that is felt in nearly every community in the US, especially among working class communities. For an excellent primer on how the financial sectors have been rigged against the interests of working families, I recommend Matt Taibbi’s series in the Rolling Stone.
To understand how allowing a rigged banking system affects our daily lives, consider this example. Interest rates of money transfers between international banks are set by a small group of individuals from a small group of banks, called LIPOR. These few lucky bankers set interest rates hours before the markets open, which has at least two consequences. First, is that the information on rate changes before markets open can result in huge profits for anyone who knows the information, and there is ample evidence of insider exchanges. Secondly, it means a few bankers motivated by financial gain can set rates that can (and have) devastating effects on municipalities from Greece to Detroit that rely on rates for loans and bonds to fund everything from schools to roads to powers sources. Manipulated money rates have resulted in the severe deficits of cities and municipalities such as Detroit more than any other cause.
For those of us who have commiserated about the awful choices Obama has made to his cabinet in his first term, the cold hard reality has set in that they were deliberate choices to further a policy of wholesale capitulation to Wall St. Take for example the announcement today that a former aide to Sen. Debbie Stabenow, with no experience in financial markets except for an internship for Goldman Sachs, will be appointed the head of the oversight council regulating, among other things, derivative exchanges (the most complex of all financial transactions). She replaces Gary Gensler, who has made enemies lately by actually trying to enforce the few regulations that do exist on derivative exchanges. These appointments are no accidents folks.