There are talks in our country of austerity. There has been a call for fiscal responsibility for our government and that call seems legitimate in the face of rising debt. Tthere is a missing piece in the discussion of austerity, especially when the programs being cut mostly affect lower and middle-class citizens. The missing piece of the discussion is the rampant corruption and criminality spread throughout Wall Street. Before we talk about raising interest rates on student loans or cutting Medicare and Medicaid we need to talk about the billions of dollars lost on Wall Street through bid-rigging and the mortgage bubble.
In 2011, the bid-rigging scandal, one that is only now being brought to light, helped bankrupt Jefferson County, Alabama. It was later found that in this particular case bribing occurred between officials responsible for issuing the bonds and the brokers and banks involved in the bidding process. The result saddle the county with over 3 billion dollars worth of sewer debt. This was only one tiny part of the entire system that developed to skim money from the United States financial system.
Matt Taibbi, in his June 21, 2012 article, “The Scam Wall Street Learned from the Mafia,” he goes into extensive detail of the breadth of corruption in our banking institutions. Among the banks named in the ensuing slew of criminal activities were GE, J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and among others. Some of those names should sound familiar because they are banks that accepted TARP money when the subprime mortgage bubble burst in 2008. Other banks on the list purchased other banks during the disruption that followed the burst and then became larger. Some of these banks are in the news again this past week.
J.P. Morgan Chase and UBS have both been called into question in the LIBOR rigging scandal. If this new scandal serves to prove anything it is that the problem with the banking system is not entirely a United States’ problem. As many publications have pointed out, the proble, first discovered at Barclays, has brought investigations from around the world. The discovery of these cases of corruption and law-breaking should lead to industry-wide reform and punitive action, but it hasn’t. Many of those who were in charge of those banks during the known years of corruption now hold offices meant to investigate those crimes.
The most prominent example would be Henry Paulson. Paulson gave up a CEO position at Goldman Sachs to become Secretary of the Treasury in 2006, two years before the bubble he helped lobby for collapsed. In 2004, Paulson along with other major investment bankers lobbied Congress to cut restrictions on leverage limits. They got what they came for and by 2008, the same year Time magazine named Paulson a runner-up for Person of the Year, the massive bubbled popped. The question we need to ask is how did one of the people responsible for building critical leverage levels not see their collapse coming? Or if he did see it coming why was there only light reformation after the collapse?
The example of Jefferson County coupled with the millions of people who have felt the hit from the mortgage collapse and economic recession should be enough to mobilize the people of this country into an uproar. Other than the much lampooned Occupy Movement, there hasn’t been much headway among those most affected by the tightening economy. A tightening of our belts forced on us by the decisions made by these banks to trade long-term gains for much riskier short-term ones. They traded normal people’s lives for profit margins. For Republicans demanding fiscal restraint, it begins with the banks. In all these cases, we were left holding the check for billions of dollars that banks took from the system. For Democrats pushing for change and reform, there is no better place to start than the banks. For those in the center, well it is a massive case of corruption and theft and that speaks for itself.
The Taibbi article detailed the case of United States of America v. Carollo, Goldberg and Grimm. This case revealed that banks skimmed so much money from the system that no expert can figure the total sum. Why are we targeting social programs when we should target an obviously broke banking system? Would it save us more to reform Medicare, Medicaid, or Social Security (because no one will talk about trimming the defense budget) or to punish and receive restitution from the people who have stolen from us for the past decade. Better yet, we can attempt to make them all work better.
That would be the ideal goal. That doesn’t seem possible in the current state of country, but I for one refuse to accept austerity from a government that can’t or refuses to hold these banks fully accountable for their actions. Before we tighten our belts or the belts of our children we need to break these banks of their damaging and fraudulent behavior.