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Biggest bailout cost is the human toll
By Rev. Jesse Jackson (Columnist)
Published April 22, 2010

Biggest bailout cost is the human toll

Was the bank bailout successful? The Treasury Department, in a report leaked to the Wall Street Journal, is arguing that the bank bailout cost much less than expected–less than $100 billion, while saving the entire global financial system from collapse.

The New York Times’ invaluable Gretchen Morgenson takes this claim apart. She shows that Treasury counts the cost of stabilizing Fannie Mae and Freddie Mac, the mortgage behemoths, loan guarantees by the Federal Housing Administration, liquidity programs offered by the Federal Reserve and TARP, the $750 billion Troubled Asset Relief Program which, some Treasury officials suggest, may someday generate a profit.

But the Treasury leaves out far more than it includes. Losses by the Federal Deposit Insurance Corp. in taking over failed banks are estimated at $6.65 billion for 43 failed banks this year. We have yet to see what the ultimate cost of the toxic waste that the Federal Reserve put on its balance sheet will be.

But the biggest costs are to working people and the real economy. Joseph Stiglitz, an economist and professor at Columbia University, suggests that the transfer of wealth from savers to banks due to the Fed’s near-zero interest rate policy may be the largest redistribution of wealth in history. Banks essentially can earn fat profits on what they pay for their deposits–near zero–and what they make on their loans, especially on credit cards with average rates of 14 percent and more.

Even more staggering are the costs the Treasury doesn’t think to count: the human costs of the Great Recession. Some 8.5 million jobs were lost. Millions lost their homes, with more to come. One in four homeowners at last estimate found their homes “under water,” worth less than the mortgage. The stock market collapse savaged retirement savings and pension funds.

Morgenson quotes an economist suggesting that globally lost economic activity tallied about $4 trillion last year. The numbers are staggering.

The bailout focused on Wall Street while doing little for Main Street. No real help has gone to homeowners. Small businesses can’t get loans because banks were rescued without being reorganized and are reluctant to make new loans while they write down their toxic assets.

And perhaps equally costly, the big banks have emerged bigger and more concentrated than ever. They are back to making huge profits on trading. Bank profits are back to nearly 30 percent of all corporate profits. Million-dollar bonuses are back. And the bankers are mobilizing big time–employing more than 125 former members of Congress and former congressional staff members–to defeat financial reform. If they succeed, one cost of this bailout will be the cost of the next one sure to come.

Citizens are about to get the bill. Our national debt has exploded. And now there is a move, led by Pete Peterson, who made his fortune on Wall Street, to balance the budget by raising taxes on working people and cutting Social Security and Medicare. That would be the greatest injustice of all–the bankers who caused the crisis go back to their old tricks while paying themselves million-dollar bonuses, while the workers who were the victims are told they have to sacrifice more.

Financial reform is going forward in the Senate. But the bills before Congress are too limited. There is no serious reform in compensation practices. No measure to break up the banks that are too big to fail. The much-needed Consumer Financial Protection Agency is buried in the Federal Reserve, with other regulators empowered to review its decisions. And the banks are mobilizing to stop comprehensive regulation of derivatives and other exotic products that are the source of big earnings.

The Tea Party rallies gained attention railing at Obama and big government. But the country needs citizen movements that turn its attention to the banks and policies that caused the mess rather than the administration that was stuck with cleaning it up.

Categories: Jesse Jackson

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