Recent years have seen two organic protest movements take shape that the media is trying to portray as completely opposite, yet they are incredibly similar. Occupy Wall St has a distinct target with a focus on the big Wall St banks that control over 60% of US assets, while the Tea Party focused on the extreme levels of government spending that threaten to bankrupt our nation and at the least dilute the value of our currency. Occupy Wall Street is a much younger phenomenon than the Tea Party and has some unworkable ‘demands’, but they both strike at the heart of the problem of modern American politics and economics: crony capitalism. It is not just a banking issue, as the Solyndra scandal shows that the problem lies in government being in bed with big business, but banking is the most egregious example. For our nation and economy to move forward, we must sever the close ties between business and government, and a start would be with truly reforming our banks.
Occupy Wall St and the Tea Party are expressions of a frustrated citizenry that does not feel that their politicians are serving their interests. The Tea Party started with Rick Santelli’s tirade over the bailing out of Wall St banks, AIG and then GM & Chrysler. Occupy Wall St is targeting the Wall St banks that received bailouts yet continue to behave as they did prior to the Lehman crash in 2008. Starting under the Bush administration and continued under President Obama, Wall St banks have privatized the gains and socialize the losses through their bailout monies, yet nothing has translated to savings for citizens. In spring of 2009, the feds added to the bailouts of AIG and Citigroup in addition to relaxing accounting rule FAS 157 allowing banks to carry assets at whatever value they wanted. The zero interest rate policy of the FED is an additional bailout to the banks and punishment to American savers and fixed income seniors. At every step, the citizens of the United States have taken a back seat to the Wall St banks. Taxpayers have shouldered more and more responsibility for Wall St’s failings. Small and regional sized banks will tell you that Wall St banks have an unfair funding advantage, hurting their business. Occupy Wall St and the Tea Party are cries from ordinary Americans to stop this game rigged in favor of Wall St.
America needs a politician with the willpower to take on the Wall St banks and protect the currency and interests of Main St. We need a politician who understands that this recession is not like normal recessions. This is a cheap credit fueled, balance sheet recession with a huge debt hangover. In 2008 and 2009, the government bailed out the Wall St banks and wounded the economy. They portray their actions the other way around. Obama’s talk of reform is just that: talk, while he fundraises on Wall St and keeps Wall St lackeys like Tim Geithner in his administration. No politician is discussing it, but a stimulus idea that would not involve any public funding is the following plan. Wall St banks must mark their assets at the proper values. If this causes them to be insolvent, then the Federal Reserve can take those banks into receivership and wind down assets. As those assets are wound down, debt writedowns will occur on mortgages, student loans and consumer loans. These debt writedowns will turn into principal reductions. Removing the debt overhang from many American’s budgets will put dollars back into American pockets, affecting both consumers and small business owners.
This proposal could cause a couple of the Wall St banks to go into receivership. It might shrink some of those banks. Breaking up the big banks and writing down debt will jumpstart the average American household and help business owners’ balance sheets without adding another dime to the national debt. The other effects will be reduced rents as residential and commercial property owners will have lower costs to set their rent. The potential is there for economic growth, which will help alleviate the unemployment problem and increase tax receipts which will help the government deficit problem. Leaving zombie banks alive is the path Japan followed as they have had minimal growth for 20 years because they did not address the bad loans and banks. This plan does not have support from either political party. That tells us more about Democrats and Republicans than it does America.