With the exception of health care reform, the biggest lobbying battle taking place in Washington, DC today is over the issue of financial regulatory reform. For Building Trades Unions, this issue has far-reaching consequences, because the U.S. construction industry is so critically dependent on the health and stability of the U.S. banking industry.
For over a decade, banks moved increasingly away from their core business of safeguarding savings and providing individual and commercial loans. They were the sturdy backbone of our entire economy, and they were the lifeblood of the U.S. construction industry – providing the capital needed to finance commercial, industrial and residential development.
But that, unfortunately, was not good enough. Banks began to look around and see investment brokers, merger and acquisition firms, arbitrage firms, and others accumulating huge sums of money and they hungered for a piece of that pie. And they were aided and abetted in this pursuit by their allies in Congress who untied the regulatory binds that had rightly constrained the banks from engaging in anything other than their core business.
So, they sold deceptive mortgages. They made billions by packaging and repackaging those loans into securities. And when they weren't selling deceptive mortgages, Wall Street invented new credit card tricks and clever overdraft fees. And now comes word that the most venerable Wall Street firm, Goldman Sachs, may have engaged in criminal behavior through its actions associated with the financial crisis facing Greece.
All the while, federal regulators played the role of the lookout at a bank robbery, holding back anyone who tried to stop the massive looting from middle-class families.
And then, in October 2008 it was suddenly all over. Trillions of dollars in individual savings and pension fund retirement savings vanished overnight. Capital markets seized up. And the construction industry went into its worst depression in a generation.
And yet here we are today, and things don’t seem to have changed at all when it comes to the banking industry. We’ve been through the second-worst financial crisis in the history of the world, and we’ve barely begun to recover. 29 million Americans either can’t find jobs or can’t find full-time work. The unemployment rate in the construction industry today is nearing 30% nationwide…and in some areas our unions are reporting almost 60% unemployment!
In fact, an analysis of the February 2010 unemployment numbers released by the U.S. Department of Labor reveals a startling fact. Were it not for the dismal state of the U.S. construction industry today, THE U.S. ECONOMY WOULD HAVE REALIZED A NET GAIN OF JOBS IN TWO OUT OF THE LAST THREE MONTHS!
In other words, the U.S. construction industry – which is so heavily dependent upon the availability of capital for its health and survival, is in the throes of a depression so severe that it is dragging our entire economy down with it.
And what is the response from the banking community? Well, Wall Street is reporting record profits, and any efforts to free up capital for construction projects is virtually non-existent.
In fact, The Treasury Department said on March 15th that new lending plummeted in January at the nine largest banks that received taxpayer-funded bailouts. Treasury's monthly survey of bank lending indicates that new loan origination dropped 35 percent from December's level. The nine banks are: Citigroup Inc., Comerica Inc., Fifth Third Bancorp, Hartford Financial Services Group Inc., KeyCorp, Marshall & Ilsley Corp., PNC Financial Services Group Inc., Regions Financial Corp. and Suntrust Banks Inc.
Increasing lending to consumers and small businesses was one of Congress' stated goals when it passed the $700 billion financial bailout in October 2008.
And to add insult to injury, all momentum for serious banking reform has seemingly been lost. Perhaps that is the result of the more than $300 million that Wall Street banks have invested in lobbying against meaningful reform. Sadly, the question now seems to be whether we’ll get a watered-down bill or no bill at all.
How did we get to this point? And should reform advocates accept the compromises that might yet produce some kind of bill?
Congressional Democrats have dragged their feet because of they have long been the favored recipients of massive campaign contributions stemming from the hedge fund industry. Congressional Republicans are opposing meaningful reform on what they say is principle. They have claimed that they would end banking excesses by introducing “market discipline” — basically, by promising not to rescue banks in the future. It’s the same logic they use in opposing meaningful workplace safety measures. In other words, congressional Republicans would let the banks discipline themselves.
But, as we know all too well, that’s a fantasy.
Relying on the magic of the market has always been a path to disaster. Even Adam Smith, the father of free-market economics, argued that bank regulation was as necessary as fire codes on urban buildings, and called for a ban on high-risk, high-interest lending – the 18th-century version of sub-prime lending.
One would have to imagine that there are many Republicans who, in their heart of hearts, understand the need for real reform. But in today’s Washington, logic and common sense must yield to the wishes of political opportunity. The GOP strategy of opposing ANYTHING the Obama administration proposes, coupled with the lure of financial-industry dollars has trumped these lawmakers’ concerns. In fact, in December of 2009 top Republican leaders huddled with bank lobbyists to coordinate their campaigns against financial regulatory reform, and the Wall Street money spigot has now been turned to “GOP.”
So, here we sit in the middle of March in 2010, and nothing has been done to change the market. Nothing’s been done to make it more transparent. Nothing’s been done to force banks back into their safe and productive practice of safeguarding our money and providing capital for economic expansion and development.
Wall Street has, in effect, set itself apart from the concerns and interest of America! They seem to think that they can run their businesses forever as they see fit; without the trust of American consumers and businesses; and without any interference from government.
The lessons of our own nation’s history bear repeating. The laws and reforms that came about during and after the Great Depression put an end to over 100 years of “boom-and-bust” economic cycles that stifled American economic growth and prosperity, and which then produced 50 years of financial stability with virtually no financial meltdowns. It is not coincidental that that stability ended as we began the systematic dismantling of those laws.
When the history of this recession is written, today’s Wall Street charlatans will either be singled out as the “bonus babies” who were so short-sighted that they put the economy at risk and contributed to the destruction of their own companies; or they can acknowledge how Americans' trust has been lost and take the first steps to earn it back.
But, it will take a lot of goodwill on the part of the big banks to make up for what they have done to America. Unfortunately, all indications today suggest that they have not chosen to build that goodwill.