Laws favoring the ultra-wealthy are nothing new in the United States. Lack of regulation and rampant speculation on Wall Street led to the market crash in 1929 and the subsequent “Great Depression.” The same could be said for the “Great Recession” in 2008. Unlike the Great Depression, where Congress put into place economic and regulatory protections to prevent such a calamity, our Congress has done almost nothing to prevent another Great Recession. And why has Congress done nothing? Ultra-wealthy special interests will not allow it, and Congress continues to pass laws favorable to the Wall Street crowd at the expense of 99% of Americans.
When Wall Street is not regulated adequately it makes millions for a few while placing our country’s economy in peril. We need look no further than the tech bubble in the 1990’s, the collapse of Enron in the early 2000’s and the Great Recession of 2008 to see what happens when Wall Street runs America.
How can it be tax laws and other regulatory laws are allowed to be passed that favor less than one-percent of the population and place in danger the entire United States economy? The answer is simple: the wealthy have paid to make sure only their interests are served.
For example, the bankruptcy “reform” legislation of 2005 greatly limited the number of Chapter 7 bankruptcies in favor of more Chapter 13 bankruptcies. The legislation also made non-dischargeable government backed student loans.
Chapter 7 bankruptcy allows debtors to liquidate unsecured debt such as credit card debt, get a fresh start and become productive citizens again. Chapter 13 bankruptcy forces debtors to pay back a portion of their debt. Banks and other financial institutions lobbied Congress hard to make it more difficult to file Chapter 7 bankruptcy in order for creditors to make more money. Of course nothing was said about the fact the banks should never have loaned the money or charged such exorbitant interest rates in the first place.
Conversely, if a business needs to file Chapter 11 bankruptcy, Chapter 11 allows the business to make debt more manageable. Likewise, individuals and businesses who purchased certain kinds of bonds in those businesses are paid back first and in full even though those in less favored positions are paid back far less if at all.
The previous example is emblematic of our current system of government where laws are shaped not by what is good public policy but by the depth of one’s pockets. We see this time and time again with the brokerage houses, who lose billions, get bailed out and pay out tens of millions in bonuses to executives who lost their client’s money.
Similarly, tax laws are slanted to favor a small group. Tax laws written by Congress allow multi-millionaires and billionaires to pay less than 15% in taxes because much of their income is derived from investments.
Nowhere was Congress’s lack of oversight and favoritism towards a select few more evident than in the collapse of the housing market in 2008. Banks and brokerage houses knew they were loaning money to people who could not pay and would default. But it was far too profitable for the banks and brokerage houses not to do so. For example, in Stockton, California there were “$400,000 per year bus drivers.” Banks were not required to verify income with tax returns. Instead they took the person seeking a mortgage’s word for it. If proper regulations had been in place, these bad loans would never have been made; defaults would not have occurred in such great numbers; and the market would likely not have collapsed.
Most banks dabbled in the speculative housing market, and the vast majority survived in large part due to government bailouts. In spite of the poor performance of these financial institutions, the government rescued them because they were “too big to fail.” Now many are making record profits.
It is not that all the banks and other financial institutions are doing anything illegal, although some have engaged in illegal activity. The problem is the laws are slanted in favor of a few people. The laws need to be more equitable, and they will not be so long as Congress allows only a select few to benefit from the laws at the expense of the vast majority of the country.
Our system of government is premised on our collective sense that things are fairer and better in the United States. In essence, our “goodness” makes us great. When such inequalities persist in the law it undermines our national identity as Nobel Prize winner Joseph E. Stiglitz argues in The Price of Inequality:How Today’s Divided Society Endangers Our Future.
The financial markets are vast and complicated, but the problem is simple. It is about fairness. Without fairness our economy is threatened, and our whole system of government is undermined.
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