By Nancy Spannaus
Dec. 3, 2020–With the election all but over, Wall Street is finally back in the news. Hearings in the Congress this week brought sharp confrontations over the way the Trump administration’s rescue packages for the COVID-struck economy (like the Obama rescue packages before it) have fed the massive speculative bubble which we see in lower Manhattan, while a huge number of Americans teeter on the brink of eviction and hunger, local government lay off tens of thousands, and businesses close. As I said in my book, Hamilton Versus Wall Street: The Core Principles of the American System of Economics, this is the Wall Street Hamilton would be the first to oppose if he were alive today.
The go-to source for exposing Wall Street’s shenanigans, in cahoots with the administration, is the blog WallStreetonParade, which publishes daily reports on the crimes being committed by collusion between the major banks and the Federal authorities who are supposed to be minding the store.
Much of the bruhaha lately has been over Treasury Secretary Mnuchin’s decision to “take back” funds which the CARES act of the spring allocated to the Federal Reserve to help support small businesses. Most of that money remained unspent—i.e., the Fed didn’t fulfill its mandate. According to Wallstreetonparade, the Fed actually never got the bulk of that $484 billion — $340 billion of it instead stayed in a Treasury slush fund called the Exchange Stabilization Fund. As the fund’s title indicates, the money thus was allocated to managing currency markets, not aiding “Main Street.” Meanwhile, 98,000 businesses have permanently closed in the United States.
The sabotage of the Main Street bailout fund is a small part of the problem, of course. The Treasury and the Fed have been pouring resources into the Wall Street banks, which have fed their funds into building the massive speculative bubble on the stock market. Borrowing costs are cheap (unless you are a lowly individual credit card borrower), and corporations are piling on the debt. A recent article by Treasury&Risk reported that zombie corporations – that is, firms that are not making enough money to pay the interest on their debt and are technically insolvent – now make up 20% of publicly traded companies. These include such giants as Boeing and Exxon, who are borrowing like mad just to stay afloat.
A truly effective approach would call not only for cracking down on Wall Street speculators, but for massive investment in productive employment, as I indicated in my recent post on FDR’s emergency job creation program.
Wall Street is currently putting the pressure on the presumptive Biden Administration to try to ensure that there is no change in course; having poured cash to the Biden-Harris election campaign, they intend to politically collect. Should the Democratic Party capitulate, the future is ominous indeed.
There is no avoiding the need to return to Hamiltonian principles of political economy, which demand that the Federal government regulate financial institutions to prevent speculation (restore Glass-Steagall banking separation), and guarantee flows of credit into the productive economy, emphatically including vital, high-technology national infrastructure. But there is precious little understanding today of those principles, once called the American System of Economics.
It was to deal with that problem that I wrote Hamilton Versus Wall Street. If you haven’t read it, it’s time you did so right away.