Bankers Are Creating a Slot Machine with Our Money

The nation’s financial markets were a disaster waiting to happen, and the recent crash has given progressives the perfect opportunity to create a more fair and prosperous economy, says a leading author.Les Leopold, author of The Looting of America, says the nation’s economic disaster was caused by a financial crash that has been brewing for 30 years. It began when policymakers created a trifecta of deregulated financial markets, tax codes that favored the rich and new trade rules.

[These policies] were supposed to lift all boats; instead, we got a gigantic bubble which burst.

Leopold, executive director of two nonprofit educational organizations—the Labor Institute and Public Health Institute—spoke last night at the National Labor College (NLC) in Silver Spring, Md.

Over the past three decades, Leopold says, real wages dropped for working people while the super rich prospered under the new policies. In 2006, for example, the top 0.1 percent of the nation—about 130,000 people—had as much income as the bottom 50 percent—some 64 million people. From an economic perspective, he says, if you let income get that skewed, you’re going to have a financial crash.

That’s what happened in 1929 before the Great Depression and again in 2008, he says. So much money poured into the hands of the rich that it created a demand for new ways to invest, and Wall Street responded with a series of shaky financial packages.

It was like we gave Wall Street the keys to the car and watched them crash it right in front of us.

Any financial reform must consider that putting so much money in the hands of so few is a recipe for disaster, Leopold says.

It’s like drugs. You can regulate the supply, but if you don’t cut the demand (so much money in the hands of the rich), nothing will change. Wall Street will simply come up with new schemes.

The test for whether a proposed solution to the financial crisis should simply be whether it is moving money out of Wall Street to the real economy and from the top of the economic scale to the bottom, Leopold says.

Progressives should be fighting for sweeping changes to narrow the wage gap. While unions have been sounding the alarm for decades about the growing inequality, most people ignored it, he says. The union agenda of raising the minimum wage, increasing tax levies on corporations and the super-rich and passing the Employee Free Choice Act are all key policies that will help restore balance to the economy, he adds.

Leopold also called for wage caps across the board on Wall Street and a new tax on financial transactions.

The financial reform policies being pushed by the Obama administration and Congress are filled with “incredible rhetoric, but with weak knees,” Leopold says.

The $13 trillion bailout of the financial markets has put all of Wall Street “on welfare,” and now is the time for progressives to push hard for real change. But progressives are letting the banking industry and others get away with framing the debate on reform, Leopold says.

He points to the notion among many in Congress that reforms should not hinder the financial market’s ability to innovate.

[Financial innovation] is a lot of bunk. They’re just creating a better casino game. We have to be very cautious. [The bankers] are not creating an iPod; they’re creating a slot machine with our money.