Between the Lines Q&A

A weekly column featuring progressive viewpoints
on national and international issues
under-reported in mainstream media
for release Nov. 4, 2009

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Banks That Triggered Financial Collapse
Push Back Against Proposed New Regulations

RealAudio MP3

Interview with Les Leopold,
author of the book, "The Looting of America:
How Wall Street's Game of Fantasy Finance
Destroyed Our Jobs, Pensions and Prosperity," conducted by Scott Harris

banks

With the national debate on health care reform set for a likely congressional vote before the end of the year, the issue of establishing new banking regulations is now coming into focus. One year after the financial meltdown that ushered in the worst U.S. economic downturn since the Great Depression, the Obama administration and Congress have set their sights on passing laws to rein in the risky behavior of financial institutions that were deemed too big to fail during the 2008 financial collapse. Obama, reacting to public anger, has recently imposed caps on executive salaries and bonuses in banks receiving billions of dollars in government bailout funds.

Legislation being proposed would force the nation's largest banks and investment firms to hold more funds in reserve and make it more difficult to engage in casino-like behavior with other people's money. But some observers say the administration' proposed new regulations don't go far enough, and instead favor breaking up the big banks, making it less likely that taxpayers would in the future be called to pay for another trillion dollar bailout.

But the nation's financial institutions, blamed for bringing down the economy, are now gearing up to use their enormous wealth to fight new regulations. The loss of jobs, homes and savings motivated an estimated 5,000 activists, many of them union members, to protest in the streets of Chicago during the recent annual convention of the American Bankers' Association. Between The Lines' Scott Harris spoke with Les Leopold, author of the new book, "The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions and Prosperity and What We Can Do About It," who talks about the fight ahead on re-regulating America's banks.

LES LEOPOLD:What I'm about to say now, is virtually outside the pale of the debate, but I actually think that it's the only thing that's going to prevent us from heading into what I call the billionaire bailout society. I don't think we're living under capitalism any more. We're living in a new kind of world where money is still accumulating in the hands of the few and it's a system that's now set up with institutions that are "too big to fail," such that we bail them out when they get into trouble. We transferred more money a year ago from the taxpayer to Wall Street. We transferred more wealth than at any time since slavery. It was an enormous amount of money. The estimate isn't just TARP money. All the other guarantees we put into place come to about $13 trillion.

So, here's what we basically have to do is undo the experiment. I hate to say it, but I am a Teddy Roosevelt and Dwight D. Eisenhower Republican. That's how radical we have to be. We have to go back to Teddy Roosevelt and Dwight D. Eisenhower. Glass-Steagall is not enough. Even if we broke institutions into two large institutions that had the Glass-Steagall wall between them, that's not good enough. They have to be small enough to fail. They can't be so large that when they get into trouble it forces us to bail them out; they have to be small enough to actually fail. We have to go back to the trust-busting days of Teddy Roosevelt, who was riding on the crest of the populist progressive movement at the time. And people understood that concentration of that kind of power had to be broken up.

The other thing we need to do is we have to dramatically change the tax system. Right now, and this is something that George Soros said: "The entire Wall Street has been given a gift," he put it. I call it "they're on welfare." In this country, when we put low-income people on welfare, we put very tough conditions on people getting that money. They've got to work, they can't get too much income, etc., etc. We've got nothing going on (like that on) Wall Street, except for the major "troubled" institutions. But the ones that have paid back TARP that are still taking advantage of all these other welfare subsidies we're giving, they're free to do what they want.

That can't be. We need what I call -- it's interesting -- I call for it in "The Looting of America," now it's even more relevant. We need what I call the president's wage cap. Nobody on Wall Street earns more than the president of the United States until unemployment comes down below five percent. Because what we haven't talked about is that this tragedy is not just a transfer of money. There are 29 million people right now who don't have jobs, or are working part time but they want to work full time. The Bureau of Labor Statistics has a U6 unemployment rate. It stands at 17 percent right now. That's a tragedy. We have to tie the fate of Wall Street to the fate of the real economy. And one good way to do it is to slap an across-the-board wage cap. The other thing we need to do is have a windfall profits tax. I mean, it's outrageous that Goldman Sachs is going to have a record profit year. How did do that, I wonder. Well, if you give them billions of dollars, they're going to make money.

BETWEEN THE LINES: A lot of these big financial institutions that were bailed out to the tune of hundreds of billions of dollars by the U.S. taxpayers are now fighting tooth and nail against any kind of substantive reregulation of the finance industry to prevent another collapse in the future. What are we up against as a country here in trying to fight our way back to the regulations that were put in place after the Great Depression and that ushered in a real era of prosperity for this country?

LES LEOPOLD: Look, we have to fight back. We need to build a movement. All the pressure on the Obama administration and Congress is coming from the banking community. Very little is coming from the progressive side. It's like, I think a lot of people feel so intimidated about finance that they just don't want to get involved. That's why I wrote this book. Then we've got to get mobilized. Like what's happening in Chicago right now with some demonstrations at the American Bankers Association. We need a lot more of that, because the sentiment is there. You could talk to anybody in the country about these issues virtually, and people will agree with you, but we need to get them mobilized.

You know, it took a generation for the populace to get their act together and actually change the world. It took a generation before the New Deal. All those ideas came from the labor movement and from progressive movements from the 1920s and before. They finally came into fruition in the 1930s. It's going to take real organizing on our part to change the world. It's not going to happen with Twitter and Facebook. We're going to have to go out there and build institutions and build a movement that's going to fight back against the bankers.

Visit Les Leopold's website at www.lootingofamerica.org

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Scott Harris is a producer of Between The Lines, which can be heard on more than 45 radio stations and in RealAudio and MP3 on our website at www.btlonline.org. This interview excerpt was featured on the award-winning, syndicated weekly radio newsmagazine, Between The Lines for the week ending Nov. 6, 2009. This Between The Lines Q&A was compiled by Anna Manzo.

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