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Everything you want to know about instruments of financial mass destruction — but were afraid to ask! Les Leopold explains the financial meltdown in plain English — and what we should do about it. Also, Representative Representative Barney Frank talks about the TARP.
Les Leopold and THE LOOTING OF AMERICA
On July 16 the New York Times reported, “A new order is emerging on Wall Street after the worst crisis since the Great Depression.” The article pointed to soaring profits by Goldman Sachs and JPMorgan Chase. A few days later, Bank of America exceeded earnings expectations. Altogether, Bank of America Corp., JPMorgan Chase and Citigroup Inc., the three biggest U.S. lenders by assets, reported a total of $10.2 billion in profits for the second quarter. Wall Street ate it up, with the Dow Jones now up more than 2000 points from its February low and the S&P 500 up 40%.
But something else is also going up—and that’s the unemployment rate, now at its highest level in a generation, with 25 million out of work. What’s going down is real wages—unless you’re a CEO. The banks, for example, are taking a hefty slice out of their huge profits for big payouts to their staff.
Is there a connection between big profits on Wall Street and continued suffering on Main Street? Les Leopold explores that question in his new book, [amazon-product text=”The Looting of America: How Wall Streets Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It” type=”text”]1603582053[/amazon-product]. He argues that the meltdown was caused by an income distribution that’s wildly skewed. The ratio between the top CEO salaries and the bottom rung of workers wages went from 40:1 in 1970 to almost 1800:1 in 2006. That resulted in an excess of capital from the top hungrily seeking outsized profits from speculation (what Leopold calls instruments of financial mass destruction) instead of investing in the real economy. He says it’s something like fantasy baseball–and when the season players — the banks — went on strike, the whole house of cards came tumbling down.
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We first talked with Les Leopold in December of 2007 about his biography of labor leader Tony Mazzochi, The Man Who Hated Work and Loved Labor. He also directs the Labor Institute and the Public Health Institute.
- Les Leopold on Huffington Post: Saving Obama from Political Suicide
- Articles by Les Leopold on Alternet
Barney Frank on Wall Street
In September of 2008 I interviewed Congressman Barney Frank for the other radio show I produce (with co-producer Bill Baue), Sea Change Radio. Bill and I talked with Frank just before the House Financial Services Committee, which he chairs, submitted the Troubled Asset Relief Program (TARP) — otherwise known as the Bailout Bill — to the full House. It eventually became law, with some changes.
In our interview, Frank promised an oversight board for the TARP that would ensure liquidity in the mortgage markets. He also promised “significant” help for homeowners from foreclosures. And he said the TARP would include limits on executive pay. Ten months have passed since we talked to Frank, so let’s look at some of what actually has happened:
According to a report from the Treasury Dept, the Financial Stability Oversight Board, which was written into the TARP, has “overall helped mortgage borrowers by increasing liquidity in the mortgage market.” On the other hand, mortgage foreclosures continue to soar, spreading beyond the subprime mortgage sector as unemployment rises. So the significant foreclosure protection Barney Frank mentioned hasn’t worked out so well.
And what about limits on executive compensation? The TARP didn’t end up doing much to control executive pay, but the Stimulus Bill did put some limits on bonuses for firms that accepted bailout money. But they only apply before those firms have paid the US government back for the taxpayer funds they received. Goldman Sachs and JPMorgan Chase paid back their bailout money to avoid having to conform to limits on pay, with Goldman Sachs giving out the biggest bonuses in the firm’s 140-year history. Citigroup and JP Morgan are raising salaries instead.
Finally, how much are the paybacks really worth? The US Treasury says the true value of the warrants being paid back can’t really be determined. That has raised concerns that the government is getting less than it’s owed.
4 thoughts on “Les Leopold and Barney Frank: Wall Street and THE LOOTING OF AMERICA”
I’m an old high school friend of Les and wanted to know how to e-mail him. Meanwhile, I’d appreciate his e-mailing me. Thanks, sherry
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