Jul 20, 2009
The biggest Wall Street banks, including JP Morgan Chase, Bank of America and Citigroup, announced big profits for the last three months. Leading the pack was Goldman Sachs, with 3.44 billion dollars in profits. It also said that it set aside a whopping 11.4 billion dollars in bonuses for its employees, the lion’s share of which goes to the top executives. The bonuses are as high as what Goldman Sachs paid in 2007, during the height of the financial bubble.
Of course, these profits were not taken from their businesses, but from the trillions in government bailout money that the government handed over to them. A chunk of this government money came through AIG, which handed over close to 20 billion dollars to Goldman Sachs alone. Another huge chunk was handed to them in the 700 billion dollar TARP program. Beyond that, the government bought up or guaranteed their toxic assets and debts, loaned them money interest free, etc. Most of these operations have been kept secret, despite all the politicians’ talk about “transparency.” As for the banks promise to repay most of this money... don’t hold your breath.
This bailout money, the story goes, was supposed to stimulate the economy, fund new investments, help create jobs, reduce what people owed on their homes and ease the housing crisis for ordinary people.
None of that happened.
The only thing the government bailout stimulated was bank profits. The rest of the economy has continued to plunge. The number of unemployed has practically doubled in a little over a year. And every month, there are more and more homeless.
So, no, the money that went to the banks didn’t stimulate the productive economy. Worse. In the midst of the economic plunge, the banks are squeezing the economy dry. They are ratcheting up their profits by increasing how much borrowers have to pay on loans, mortgages and credit cards. The banks are ramping up the foreclosures and tossing millions of people out of their homes, with estimates that three million families will face foreclosure this year. The banks have penalized savers by paying almost no interest on deposits. And they launched a new plague of fees and penalties on anything and everything.
Last week, Treasury Secretary Timothy Geithner dared say he was starting to see a recovery in the financial sector. The financial sector, yes. The banks are returning to what they did before: making money on money – speculating on a massive scale. But this time they are doing it with government money. New waves of speculation are what is behind the wild price swings in energy prices, for example, or the ups and downs in the stock market.
For these banks, it is a no-lose situation: they are risking nothing but taxpayer money for their own private gain. At worst, they could again threaten to collapse... and get a fresh bailout!
The capitalist system, which those big banks dominate, can no longer provide jobs, services, products. More and more of the basic necessities are being eliminated, just so that the fabulously rich can grow even richer.
This capitalist system, which long ago outlived its usefulness, ought to be junked, thrown into the dust bin of history – as a famous revolutionary, Leon Trotsky, recommended over 70 years ago.