If one runs a web search entitled 'thieves of wall street', the result will be at least several thousand articles, a few of which are based on empirical evidence and/or sound analysis of how Wall Street operates with the backing of government. The 'thieves of Wall Street' would not be an issue if the economy was thriving, if there was upward social mobility, and/or if there was more equitable income distribution.
In previous postings, I have addressed the widening gap between rich and poor in the US, as well as the shrinking middle class weakening along with the working class. This is a phenomenon that is also true of Europe that has roughly about the same percentage of official unemployment and people living below poverty line as the US. Salaries and social security benefits have actually declined, while corporate profits have skyrocketed in the past year.
The question is whether the political establishment, Democrat and Republican, represents the average American or corporate America and Wall Street that provides the campaign contributions. If indeed politicians represent the average American, why are the lives of workers and middle class Americans deteriorating and the future of their children uncertain, and why has government not sent to prison those who broke the law and caused the recession of 2008-present?
The latest figures show that the wealthy are spending at pre-recession levels and they view the current recession as a nuisance. By contrast, the bottom fifty percent of the population is sticking to purchases of necessities, partly because of erosion in income, but also because of rising prices in everything from energy to foodstuffs.
The future does not look any more promising for the middle class and workers, as prices of commodities and wearing apparel are expected to rise between 5 and 15%. For the bottom 20% of the income group this means spending 35% of earnings on food and 10% on gasoline, leaving a bit over half of earnings for all other expenses. By contrast, the top 20% of the income earners spends a mere 6.8% on food and 2% on gasoline. The economy is definitely showing improvement signs for the upper 20%, but not for the remainder of the population.
A number of states, especially mid-Western, have launched an anti-labor campaign that is designed to transfer income from the professional middle class and workers to corporations. Some states are even proposing cutting the length of unemployment benefits and prescription medications, including HIV/AIDS drugs that many single mothers and children need to live.
While the state government is taking measures to strengthen corporate welfare and cut middle class and working class living standards, there has been a virtual absence of enforcing the law against Wall Street and other financial sector executives responsible for the schemes that resulted in the recession of 2008-present.
Government had promised to crack down on violators of the law in various schemes from insider trading to deceiving and defrauding clients. While a few have been arrested and tried, most are doing very well making money the legal way whenever possible.
Bear Stearns, JP Morgan, Goldman Sachs, Morgan Stanley, Bank of America are among of the few giants of Wall Street about which there is enormous information regarding 'structured mortgage bonds', which are essentially fraudulent products, that helped to precipitate the deep recession costing trillions to US taxpayers. The New York Times has been following this story, but it has reported that high level officials ordered prosecutors to back off the cases. Why does government not enforce the law?
The concern was that if these companies folded, they could drag down the entire US economy to an even worse situation that it has faced in the past four years. However, the crisis is over and these financial institutions are reporting record profits and a portion of the bailout money is repaid, so what is preventing prosecutors in 2011 from doing their job now?
On 24 May the Commodity Futures Trading Commission (CFTC) filed a civil enforcement action in the U.S. District Court for the Southern District of New York against Parnon Energy Inc., Arcadia Petroleum Ltd. of the United Kingdom, Arcadia Energy of Switzerland, James Dyer of Australia and Nicholas Wildgoose of California. In the first four months of 2008, the defendants tried to illegally manipulate crude-futures prices on the New York Mercantile Exchange, making a minimum of $50 million and in the process drove the price of West Texas Crude to higher levels.
By contrast, attacking labor unions, public employees, slashing benefits, and cutting unemployment benefits is acceptable and even commendable in the current neo-liberal climate that prevails in the US and across much of the world. Therefore, it is politically acceptable to use taxpayer money to bail out the thieves of Wall Street and the companies they represent, but it is 'Socialism' to cut the subsidy to a kid in the ghetto suffering born with HIV/AIDS. This is a reflection of America's corporate and political values in the early 21st century.
When billionaire Raj Rajaratnam was recently convicted on 14 counts, of securities fraud and conspiracy, there were a number of 'respectable' apologists of Wall Street who wrote that there is really nothing wrong with insider trading, and that laws regulating such 'free trade' practices give government arbitrary powers.
Running the hedge fund Galleon Group worth $1.8 billion in 2009, Raj was actually putting 'free enterprise' to work, even if he was receiving insider trading information from a Goldman Sachs board member. That practices from insider trading to 'structured products' to illegal Credit Default Swaps (CDS) are now associated with 'free trade' practices once confined to open, fair and honest is indicative that we have entered a vicious predatory phase of the political economy.
Each cycle in which the economy contracts, the government will be there to make certain that there is massive transfer of income from the waning middle class and labor to finance capital run by thieves who represent a system far to precious for the government to regulate, except on rare occasion to punish an 'evildoer' for the sake of appearances. One irony in all of this is that businessmen and politicians go on tour giving speeches for which they are handsomely rewarded.
While the public employees of various states are facing cuts in salaries and benefits, while HIV/AIDS patients have to make due with cuts in the subsidized prescription drug program, Bill Clinton and George Bush are making the rounds collecting millions in speaking fees - $15 million for Bush from 2009-present, and $65 million for Clinton from 2000-2009.
The poor-rich gap is not just a phenomenon confined to countries like Mexico, Saudi Arabia, Russia, etc., it is a reality in the US, just as it is a reality that there is an immense socioeconomic gap between US politicians and the average voter. Is this the kind of democracy Jefferson had in mind, one of Wall Street thieves protected by former presidents receiving $200,000 per speech, a speech that is as vacuous and meaningless about the lives of ordinary people as TV shows?
Given that politicians behave like corporate CEOs, that they take money from corporations to run their campaigns, that they make or try to make money like corporate CEOs, is there a culture clash between ordinary middle class and working class people on the one side, and corporations and politicians on the other?