Bust
Up Wall Street
When Americans think of how the economic rules are stacked against them, they naturally think of Wall Street.
When
the Wall Street bubble burst in 2008 because of excessive risk-taking, millions
of working Americans lost their jobs, health insurance, savings, and homes.
But
The Street is back to many of its old tricks. And its lobbyists are busily rolling back the Dodd-Frank Act,
intended to prevent another crash.
The
biggest Wall Street banks are also much larger. In 1990, the five biggest banks
had 10 percent of all of the nation’s banking assets. Now, they have 44 percent
– more than they had at the time of the 2008 crash.
They have a virtual lock on taking companies public, play key roles pricing commodities, are involved in all major U.S. mergers and acquisitions and many overseas, and responsible for most of the trading in derivatives and other complex financial instruments.
And as they’ve
gained dominance over the financial sector, they’ve become more politically
potent. They’re major sources of campaign funds for both Republicans and
Democrats.
Wall
Street banks supply personnel for key economic posts in Republican and
Democratic administrations, and lucrative employment to economic officials when
they leave Washington.
It’s
a vicious cycle. The bigger they get, the more likely it is that government
will bail them out if they get into trouble again.
This, in turn, confers on
them an ever-larger competitive advantage over smaller, community-minded banks
that don’t have the implied guarantee – which gives the biggest banks even more
economic and political power.
What
should be done?
First, resurrect the Glass-Steagall Act that used to separate investment from commercial
banking.
Second, put a small sales tax on every
financial transaction. This would discourage speculation and slow down
the casino. Not incidentally, such a tax could generate billions of dollars a
year for, say, better schools.
But
the most important thing we should do is bust up the big banks.
Any bank that’s too big to fail is too big, period.
Antitrust
law should be used the way it was against the big oil trusts and the telephone
monopoly. The idea was to prevent too much economic and political power from
concentrating in too few hands. And that’s precisely the problem with Wall
Street.
The
only sure way to stop excessive risk-taking on Wall Street so you don’t risk
losing your job or your savings or your home, is to put an end to the excessive
economic and political power of Wall Street.
It’s
time to bust up the big banks.
ROBERT B. REICH, Chancellor’s Professor of Public Policy at
the University of California at Berkeley and Senior Fellow at the Blum Center
for Developing Economies, was Secretary of Labor in the Clinton administration.
Time Magazine named him one of the ten most effective cabinet secretaries of
the twentieth century. He has written thirteen books, including the best
sellers “Aftershock" and “The Work of Nations." His latest,
"Beyond Outrage," is now out in paperback. He is also a founding
editor of the American Prospect magazine and chairman of Common Cause. His new
film, "Inequality for All," is now available on Netflix, iTunes, DVD,
and On Demand.