As Washington was betraying regular Americans in favor of big banks, Elizabeth Warren took to the Senate floor last week to ask, “Who does Congress work for?” She probably should have included President Obama in her question.
Warren, D-Mass., was talking about a bank-authored spending bill amendment that constituted one of the most generous giveaways to banks since the $700 billion bailout of 2008. The amendment, which according to The New York Times was written by Citigroup’s lobbyists, guarantees that banks can gamble with abandon and that when they inevitably lose, the taxpayers will pick up the tab.
Unrestrained derivatives trading was a major cause of the financial meltdown. That’s why the 2010 Dodd-Frank Wall Street reform legislation prohibited banks from using federally insured deposits on speculative products. Banks moaned that having to risk their own funds in the financial casino makes their products too expensive. But those products should be expensive because they carry extraordinary risks.
Unfortunately, the president is expected to agree to undo the Dodd-Frank provision as part of the compromise spending bill passed by the Senate last weekend. To understand the danger this presents to the economy, consider the continuing aftermath of the recession.
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Last spring, the country finally finished recovering the nearly 9 million jobs lost in the recession, but too many of the new jobs pay lower wages than the positions that disappeared. Adjusted for inflation, median household net worth, which peaked at $115,100 in 2007, slid rapidly after the recession to just $63,800 in 2013 — the lowest figure since 1969, according to economist Edward Wolff.
Families are still suffering from stagnant wages and depressed home values, resulting in a recovery that has been slow at best.
The nonprofit financial watchdog Better Markets reports that the “cost of the financial crash in 2008 and its ongoing damage to American families is going to be more than $12.8 trillion.”
But the banks, whose recklessness caused the problem, were bailed out as millions of Americans lost jobs and homes.
What makes this sneaky bank deal even worse is that analysts say it’s only the beginning.
Further unraveling of the relatively piddling consumer protections in place will make the financial industry more likely to explode again, leaving another mess for taxpayers to clean up.
Under the circumstances, it was reasonable for Warren to ask whether Congress works for “the millionaires, the billionaires, the giant companies with their armies of lobbyists and lawyers? Or does it work for all of us?”
The answer is clear and troubling.