2009 promises to be a very good year for Goldman Sachs CEO Lloyd Blankfein. According to Wall Street estimates, his firm is expected to finish the year with $46 billion in revenues. In fact, it has already set aside $11 billion for its year-end bonuses, which is an average of $773,000 per employee. Things are looking up for Mr. Blankfein, just a year after passing around a tin cup looking for taxpayer-funded bailout money.
2009 promises to be a very bad year for many small businesses. Drive down Main Street in Monroe and you can see the impact of the Great Recession – empty stores, vacant buildings and a large tract of land that was once going to be the town’s centerpiece of economic development, which now sits empty.
To understand what’s happening in towns like Monroe today, you have to go back to 1929. In response to the stock market crash of 1929, Sen. Glass and Rep. Steagall authored legislation that prevented banks from going into the investment business and taking working people’s hard-earned money and losing it. Sound familiar? Glass-Steagall provided stability for the next 60 years, letting banks simply be banks, until the Reagan revolution and its chief economic proponent, Alan Greenspan, Chair of the Federal Reserve, began a sustained effort to undermine it. At about the same time, the financial industry started to pour buckets of money into lobbying and campaign contributions, spending $350 million in the 1998 campaign cycle alone. Then in November 1999, at around the same time banking giant Citicorp proposed a merger with Travelers insurance, which owned Soloman Smith Barney brokerage, Congress officially repealed the Glass-Steagall Act, making that new financial colossus legal.
With rules changed and regulations eased, Wall Street found new ways to make money, through complex financial instruments called derivatives and credit default swaps. These “too big to fail” bank-brokerage-insurance-financial conglomerates began to do the equivalent of walking into a casino and putting it all on red. Eventually our luck ran out, and they lost their bet.
The tragic irony is that taxpayers, like those who own small businesses, bailed out the likes of Lloyd Blankfein. To return the favor, the Blankfeins of the world turned their backs on small business owners, making it harder for them to get loans for their business, instead using the money to continue making the same kind of risky bets that got us into this problem in the first place – and nobody’s stopping them.
During the campaign, President Obama said, “we cannot only have a plan for Wall Street. We must also help Main Street,” saying that “tough new regulations on financial institutions” are needed. He can make good on his words by resurrecting Glass-Steagall, enacting comprehensive financial reforms. We can’t have a full economic recovery until you can drive down Main Street in Monroe, Conn. and see those once closed store fronts thriving, and small businesses, which are the engines of our economic growth, fueled by credit from banks. Wall Street has its recovery. Now it’s time for Main Street.