This week thousands of New Jersey public school students walked out of class to protest draconian school budget cuts. "Save my teacher," their signs read. In a state that is home to a bevy of high finance billionaires, with the highest per capita income in the nation, teachers are being sacked left and right. In our town half the student body protested outside the high school. Perhaps the protesters should turn their eyes towards the twenty-five top hedge fund honchos who took in $25 billion in 2009. Their "earnings" alone could fund 658,000 entry level teachers.
It’s ironic that the battlefield in this war over resources is public education. Because the public remains entirely uneducated about the connection between those billionaires and school budget cuts. We are clueless about what the Wall Street billionaires do to earn their riches and whether it’s of any value. We might be able to understand "weapons of mass destruction," but financial weapons of mass destruction are way beyond us.
The new earning reports are good, we read. The giant financial institutions are back to making billions through "trading." So are these bankers grown-up versions of kids trading baseball cards–or are they robber barons? Are they enriching our society or siphoning off its wealth? Maybe the marching students of New Jersey could ask Governor Christie to explain.
Here’s what we do know for sure. Our modern financial honchos are very different from the robber barons of old. Everybody knew that Rockefeller meant oil, Ford meant cars and Carnegie meant steel.
Yes, today, we know that Gates and Jobs mean computers. But who the hell is David Tepper, and what does he produce with his Appaloosa hedge fund? He must have done something pretty impressive to earn $4 billion (not million) in 2009, the worst financial year since the Great Depression, with 29 million Americans unemployed or forced into part-time work. Then again, how much would he have "earned" had we not provided more than $8 trillion in bailout funds, loans and guarantees to the collapsed financial sector?
Mr. Tepper lives in New Jersey where the governor has gone to war with the teachers, hoping to break the union and balance the budget on the backs of our students. But Governor Christie’s enthusiasm for a balanced budget only goes so far: He’s resolutely opposed to reinstituting the "millionaires’ tax" -even though the state’s fiscal crisis is a direct consequence of what millionaires and billionaires did on Wall Street.
Mr. Tepper’s personal income for 2009 would have covered the salaries of 62 percent of public school teachers–who reach 855,600 students. (Mean salary $57,645 )
But let’s not lay it all on Tepper’s shoulders. Andrew J. Hall once worked for the financial basket case called Citigroup. When it became clear that his $100 million bonus was embarrassment for the bailed out bank, his own financial group was sold to Occidental Petroleum. He’s an oil trader.
Can some well-educated New Jersey public school student please explain: What’s an oil trader? We say it’s all about gambling – me included. But does that mean that when he wins someone else loses? Can he make bets where no one loses? Or does the house lose? Are we the house and lose by paying more for gas? Or, is Mr. Hall really a shining green knight who is helping to reduce global warming by driving up the price of oil? We don’t know enough to even ask.
And unfortunately we also don’t know enough to ask the most important question of all: Do these financial barons create economic value or are they just siphoning off wealth from other parts of the economy? Is their work productive or are they just blowing air into the next financial bubble that will explode in our faces?
Because we don’t know, we also can’t discuss how our system assigns economic value to what each of us does. Something is really screwed up when we award billions to Wall Street elites for doing things we don’t comprehend, even as we lay off teachers by the thousands.
It’s the invisible hand of the free market, we’re told. Invisible is right. We can’t see, feel, touch or even fathom the outlines of our current financial system. If we were able to shine a bright light on the financial machinations happening right now on Wall Street, we might find that our financial free markets are not all that free. We might find that a few large financial institutions have a stranglehold over many financial markets and are sucking all the money out of them. We might find a massive array of government subsidies in the form of asset guarantees and cheap borrowing facilities. We might discover that like the robber barons of old with their all-powerful "trusts," the largest financial institutions have invented new forms of monopoly power and political influence.
How much does President Obama himself know about what our modern-day barons really do? You’ve got to wonder when he calls Jamie Dimon and Lloyd Blankfein "savvy businessmen" and says he doesn’t "begrudge" them their "success and wealth." As the Goldman Sachs scandal unfolds from civil to criminal charges, the President may be finding out more than he wanted to know about just what the JP Morgan and Goldman Sachs execs have been up to.
The President is not alone in accepting the equation that wealth = success = deserving of our admiration. Without much reflection many of us assume that because the rich are successful, their work must have great value. But since we don’t really know what they do, their financial haul may not in fact reflect any real contribution to our society. Ask Tony Soprano.
As we stumble around in a fog of confusion about the financial industry, more and more of our economy is being eaten up by it. Financial profits and bonuses are soaring again. The share of all corporate profits that come from finance jumped from about 7 percent in 1948 to nearly 35 percent just before the recent crash. And they are rising back up to those levels right now. (You want to see some scary pictures? Check out the financial graphs at Tradersnarrative.com.)
We were once told by gurus like Robert Rubin and Alan Greenspan that this brave new financial world was the key to a bright future. The great new service sector was supposed to replace our old, polluting industrial jobs with clean, high-paying jobs in finance. American investors would be the bankers of the world. We did it better and smarter than everyone else.
But is ripping off consumers with hidden credit card fees a worthwhile activity? How about placing layers of fantasy finance bets on subprime mortgages? Is buying and selling millions of credit default swaps on Greek bonds that you don’t own a constructive activity? Would the world really suffer if we did some heavy financial industry trust-busting? We need to know more, much more.
So how do we find out? Our journalists and commentators have to dig deeper. We can’t be cowed by the enormous wealth these "successful" financiers have amassed, even if some of them are progressive philanthropists.
It’s good for America to see its bankers parade before congressional committees and offer spirited defenses of the indefensible. The more the American people can hear banking tycoons trying to justify their existence, the angrier they’ll become. But the investigations have to go deeper. Yes, Goldman Sachs seems to have pulled off a slimy scam by building securities they knew would tank and helping a hedge fund billionaire bet against them. But it’s what they do every day that really matters. We need to ask: How are your activities helping to build a better America? How are you helping to put our people to work? Do you know? Do you care?
And then we have to decide: Should we reinstitute Eisenhower-era taxes on the super-rich? Should we tax the hell out of financial gambling? Should we cut financial institutions down to size? Should we value teachers more than we value hedge fund billionaires?
Maybe the marching students already know the answers.
Les Leopold is the author of The Looting of America: How Wall Street’s Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009.