As marginalized families without bank accounts struggle to get stimulus checks, it's time to fix the rusty pipes of our inequitable financial system.
Look no further than the leadership of the American financial industry for our own brand of oligarchs who enjoy criminal impunity.
By Robert J.S. Ross
In the global discussion of human rights, impunity refers to de facto immunity from punishment enjoyed by dictators, oligarchs, and paramilitary forces that can jail, torture, or kill anyone they wish.
Most people associate this type of impunity with Latin American dictatorships or paramilitary forces such as those who murdered trade unionists in Columbia.
But this type of impunity also sits right under our own noses. Look no further than the leadership of the American financial industry for our own brand of oligarchs who enjoy criminal impunity.
Despite well-known financial crimes that led to the Great Financial Disaster, there have been no criminal prosecutions of those who fraudulently marketed and sold the subprime mortgage-backed securities that wrecked our economy.
I was recently prompted to reflect on financial impunity when I received a ballot for the Board of Trustees of CREF, a retirement fund for college professors.
Among the nominees? An executive of Goldman Sachs.
Goldman Sachs epitomizes the fraudulent – and unpunished – behavior that ruined our economy.
Notoriously, Goldman Sachs sold investments they knew were “crap.” After selling these investments, they even bet against them. In one instance, Goldman Sachs sold an investment that one of its managers called a “shitty” deal.
How could someone who was a high executive at Goldman Sachs – and who did not resign during or after the crash – now have a hand in shepherding my retirement assets? [pullquote] How could a high executive at Goldman Sachs now have a hand in shepherding my retirement assets? [/pullquote]
It is quite an unsettling thought.
Though Goldman Sachs was fined $550 million by the SEC for one of its fraudulent maneuvers, no individual was held accountable for criminal charges. An agreement was reached that no further action would be taken against the firm.
Goldman Sachs bought “insurance” instruments called “swaps” to protect the bank against losses on these types of investments. Goldman Sachs execs bought these “swaps” from financial insurance giant, AIG. When the funds based on flawed mortgages went bust, AIG went bankrupt.
Yet Goldman Sachs was paid its full $13 billion by taxpayers. So, with a $550 million fine, plus the cost of the swap (about 1 percent of the face value), Goldman Sachs got 13 billion bucks on a fine plus swap cost of $680 million. That is a 20-1 payoff – nice work if you can get it. The fine was merely an additional cost of doing business.
However complicated were the manipulations that drove our economy into the Recession, the consequences are as subtle as a beanball and concussion. Americans will feel the effects for decades.
For instance, all of the progress in reducing child poverty made in the 1990s was wiped out in the Great Recession. Child poverty had declined from nearly 23 percent in the early 1990s to around 16 percent at the end of the decade. The Great Recession kicked it back up to almost 22 percent. Because of the reckless decisions of financial executives, these children will suffer for years to come.
While Goldman Sachs and its peers on Wall Street were making billions from the losses incurred by others, they were spearheading a new economy. Not the New Economy of the techno-illusionists or the socialists and cooperators. No, this New Economy is the economy of the finance oligarchs. [pullquote] Goldman Sachs spearheaded a ‘New Economy’ of the finance oligarchs. [/pullquote]
Behold some recent articulations of this vision. Robert Lenzner of Forbes Magazine headlined his April 2014 column, “Goldman Sachs Secret Deal with SEC Beggars Belief.” In June, Lenzner highlighted Gautam Mukunda’s Harvard Business Review article, “The Price of Wall Street’s Power.” According to Mukunda, in 1970, the finance and insurance industries were equal to 24% of the profits of all other sectors combined.
By 2013, however, “that number had grown to 37%, despite the after-effects of the financial crisis.”
Citing the work of others, Mukunda notes that “finance accounts for 15 percent to 25 perent of the overall increase in wage inequality since 1980.”
Despite the wreckage of lives the financial crisis caused, the power of Wall Street is unabated – in politics and in industry. We are living under a regime of impunity, and my retirement fund has asked me to admire the Emperor Goldman Sachs’ New Clothes.
My vote? A resounding “no.”
Clark University sociologist Robert Ross is a member of the Board of Directors of the Sweatfree Purchasing Consortium. He is the author of Slaves to Fashion: Poverty and Abuse in the New Sweatshops.