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ACCUSING BANKS: Over 100 housing activists staged a demonstration outside of the Wells Fargo shareholders meeting on May 3 in San Francisco, California, accusing the banking giant of predatory lending, not paying taxes and foreclosing on homes by using fr (Justin Sullivan/Getty Images)
This week the financial crisis finally went prime time in the form of a big budget HBO docudrama called Too Big To Fail.
It was a well-acted docudrama focused on the big men and some women in the banks and in government who tried to put Humpty Dumpty back together again up on that wall to prevent a total economic collapse when panic dried up credit and financial institutions faced failure.
Based on the work of a New York Times reporter, it offered a skillfully-made but conventional narrative, which like most TV shows, showcase events but miss their deeper context and background.
We heard all the explanations, save one.
There was greed, ambition, ego, and money lust. There were personal rivalries and ideological battles, and parochial agendas and narrow self-interest. There was panic on the street and in the halls of mighty institutions. In many ways, the program recycled and made an official narrative compelling viewing. In the end, everyone was to blame so no one was to blame.
But what was missing was any notion of intentionality and premeditation, almost no mention of systemic fraud and crime, that one word that sums up what really happened for those millions of Americans who have lost jobs and homes.
The bankers accrued more power than the politicians whom they bought up with impunity
We never saw victims or felt their pain and bewilderment. We were never shown how a shadow banking system emerged or how the finance industry worked with their counterparts in finance and insurance to transfer wealth from the poor and middle class to the superrich.
Savings and Financialization
When I was but a precocious lad, my elementary school encouraged students to take out a savings account at the nearby Dime Bank in the Bronx. We were each given a bankbook, and taught to put in $.50 a week to show us how to build wealth by being thrifty. It was with a sense of pride that I watched my balance grow.
It may have been peanuts in the scheme of things, but to me, at the time, it was the way to plan for the future. What I didn’t know was that few of us would be able to save in the future as the economy moved from production to consumption and we would end up in debt.
At the same time, in those years I watched TV shows glamorize the bank robbing antics of a man named Willie Sutton, who also staged jail breaks wearing masks and costumes. When he was asked why he robbed banks, he responded famously, “That’s where the money is.”
And it still is, except in our era, it is the banks that are robbing us.
That’s because what’s now called the Financial Services Sector has gone from about 30 percent of our economy to over 60 percent. Through a process called financialization, they have transformed how all business is done.
Making money from money soon began to surpass making money from making things.
Private equity, credit swaps, derivative deals, and collateralized debt obligations soon drove the economy. Markets became captives of high-performance trading by powerful computers.
When Wall Street became the defacto capital of the country, the bankers accrued more power than the politicians whom they bought up with impunity. Their lobbying power deregulated the economy and decriminalized their activities. They killed many of the reforms enacted during the New Deal designed to protect the public. They built a shadow (and shadowy) banking system beyond the reach of the law.
Banks ‘Under Siege’
And now, here we are, in 2011, five years after the meltdown of 2007, four years after the crash of 2008 and the passage of the TARP bailout that pumped money into the treasuries at taxpayer expense. Since then, there has been a steady parade of scandals and the disclosures that have come out since. Every week, more banks close and/or consolidate, and run into problems with regulators.
Take “my” old bank in the Bronx. It has been through as many changes as I have been. A website on bank histories runs it down:
Dime Savings Bank of New York, The
04/12/1859 NYS Chartered Dime Savings Bank of Brooklyn
09/10/1930 Acquire By Merger Navy Savings Bank
06/30/1970 Name Change To Dime Savings Bank of New York, The
09/30/1979 Acquire By Merger Mechanics Exchange Savings Bank
07/01/1980 Acquire By Merger First Federal S & L Assoc. of Port
Washington
08/01/1981 Acquire By Merger Union Savings Bank of New York
06/23/1983 Convert Federal Dime Savings Bank of NY, FSB
01/07/2002 Purchased By Washington Mutual Inc.
01/07/2002 Name Change To Washington Mutual Bank
And then, of course, some years later, Washington Mutual itself, went bust and was bought up for a song by JP Morgan Chase. Here are some of the latest headlines about the bank now known as WAMU:
WaMu agrees on post-bankruptcy control—Reuters
WaMu, Shareholders, Biggest Creditors Said to Settle—Bloomberg
WaMu shareholders are offered $25M-plus to drop claims
On the day I wrote this commentary, the New York Times reported: “The nation’s biggest banks and mortgage lenders have steadily amassed real estate empires, acquiring a glut of foreclosed homes that threatens to deepen the housing slump and create a further drag on the economic recovery. All told, they own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrack.”
