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Dear Wall Street, this is why the people are angry

'Occupy Wall Street' demonstrators occupy a park near Wall Street in New York, October 3, 2011.

Tess Vigeland: Inequity is arguably the main rallying cry of the Occupy movement. And on that score, the primary bogeymen are the nation's bankers, brokers and traders -- the so-called "one-percenters" who control about a third of the country's wealth. Commentator Josh Brown is one of those one-percenters. He's an investment adviser at Fusion Analytics in Manhattan. If you think you know what his take on all this is going to be, here's his open letter to the banks that don't seem to get why people are mad.


Josh Brown: In 2008, the American people were told that if they didn't bail out the banks, their way of life would never be the same. In no uncertain terms, our leaders told us anything short of saving these insolvent banks would result in a depression to the American public. We had to do it!

At our darkest hour, we gave these banks every single thing they asked for. We allowed investment banks to borrow money at zero percent interest rate, directly from the Fed. We gave them taxpayer cash right onto their balance sheets. We allowed them to suspend account rules and pretend that the toxic sludge they were carrying was worth 100 cents on the dollar. Anything to stave off insolvency. We left thousands of executives in place at these firms. Nobody went to jail, not a single perp walk. I can't even think of a single example of someone being fired. People resigned with full benefits and pensions, as though it were a job well done. The American taxpayer kicked in over a trillion dollars to help make all of this happen.

But the banks didn't hold up their end of the bargain. The banks didn't seize this opportunity, this second chance to re-enter society as a constructive agent of commerce. Instead, they went back to business as usual. With $20 billion in bonuses paid during 2009. Another $20 billion in bonuses paid in 2010. And they did this with the profits they earned from zero percent interest rates that actually acted as a tax on the rest of the economy.

Instead of coming back and working with this economy to get back on its feet, they hired lobbyists by the dozen to fight tooth and nail against any efforts whatsoever to bring common sense regulation to the financial industry. Instead of coming back and working with the people, they hired an army of robosigners to process millions of foreclosures. In many cases, without even having the proper paperwork to evict the homeowners. Instead, the banks announced layoffs in the tens of thousands, so that executives at the top of the pile could maintain their outrageous levels of compensation.

We bailed out Wall Street to avoid Depression, but three years later, millions of Americans are in a living hell. This is why they're enraged, this why they're assembling, this is why they hate you. Why for the first time in 50 years, the people are coming out in the streets and they're saying, "Enough."


Vigeland: Josh Brown. He wrote a scathing blog post along these same lines earlier this week. You can also follow him on Twitter @reformedbroker. While you're at it -- follow me @radiotess.

About the author

Josh Brown is a New York City-based financial adviser at Fusion Analytics.
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The previous comment should read "new federal offices," since Ron Paul is still in the House representing his very conservative district in Texas.

S Pull, reading your answer to Amy W., you apparently think that the banks either should have been nationalized or allowed to fail in 2008, since nothing short of that would have answered your objections. You say you are a fan of Clinton. Do you really think Clinton would have nationalized the banks or allowed them to fail? Both Russ Feingold and Ron Paul lost their bids for federal office during the 2008 election cycle. That should tell you something about what the majority of people who vote believe the limits of politics to be. The rise of the Tea Party on the right and the OWS on the left won't change those beliefs.

And by the way, S Pull, Obama did not have the power to "fire 1000 CEOs" from the private sector. Imagine the uproar if he had tried to do so! And if your solution to all governmental problems is to put people in charge of financial agencies who have no specialized training in economics and finance, then you need more counseling than this column can give you.

OK, S Pull, I will answer the questions that you were hoping I wouldn't since for some reason you pretended to think these questions were relevant and also didn't answer them yourself.

First of all, presidential campaigns don't have "lobbyists," but corporations do. According to The National Journal, the highest-paid lobbyist in DC as of 2010 was Jack Valenti of the Motion Pictures Association of America, and the second highest-paid was James Sammons, representing the AMA. Obama's highest paid staffer is David Plouffe, his campaign manager.

Second, Obama's largest contributor in the 2008 election cycle, according to opensecrets.org, was the University of California.

I'm sure the answers you wanted were Timothy Geithner and Goldman Sachs. Even if they were, that would simply reinforce my challenge to you to explain the responsibility of Wall Street (which included both Geithner and Goldman Sachs during the relevant period) for what happened in our economy in the last two decades.

This is a well articulated article Josh, but why aren't you mad at yourself?

Josh zeroed in on the proverbial straw that broke the camel's back; however, when you listen to the Occupy protesters, the inequity problem goes well past the rapaciousness of one industry over the past three years. And even if tomorrow morning a few dozen bankers were perp-walked in orange jumpsuits into Federal court, even if Citi and Chase and B of A and Wells-Fargo were each broken into regional or state chunks, it wouldn't be enough. At this point, none of that would address the root issues.

Student loan forgiveness is coming to be an issue of focus among the OWS demonstrators. One prominent short trader, Steve Eisman, recently warned that the next financial bubble was brewing in the student loan industry (as a securitized commodity). Are student loans still (post ‘08) included in synthetic CDOs, along with credit card debt and sup-prime mortgages, or have regulatory changes affected them? According to quantitative derivatives trader Arnav Guleria: “Yes, during July 2010 FFELP released a 188 million US dollar CDO built primarily out of student loans (there have been more recent examples as well). Student loans are frequently included in diversified CDOs' underlyings. Most of these CDOs have an open interest of CDSs (the Jul 2010 FFELP does).” This huge secondary market, driven by Wall Street investment banking, gets very little attention in the media, and these are the very schemes that have soaked up most of the bailout money; not just through the fiscal stimulus programs, but through quiet Fed injections into programs intended to maintain banking liquidity (covering fraudulent assets and hopefully rationalize them over a period of decades without taking any losses). Forgiving this debt, AND changing the law back to make student loans dischargeable in bankruptcy, would not only help to restore fairness to the system (why were they exempted in the first place?) and relieve students of unsustainable burdens, it would also smarten up the banking/securitization/student loan/secondary education market and make all involved in the industry more responsible and accountable. What we have now is another “risk distribution” business model like subprime, less the recourse to bankruptcy.

A great non-partisan overview of the problem—except, perhaps, for those who want to defend more of same policies of “self-regulation” and market discipline. Obama is the last person worthy of blame in this mess. He inherited it. I certainly wouldn’t exempt Bill Clinton, though—NAFTA, the repeal of Glass-Steagall, the Commodities Futures “Modernization” Act, the Telecommunications Deregulation Act, lobbying for deregulation of utilities in Calif., etc.? And let’s not forget Bush’s “Ownership Society” drive to increase homeownership, and the $16 trillion bank bailout, established by the Fed in late ‘07 and early ‘08, before Barack Obama was president; indeed, before he was even officially nominated. (This amount is separate from, and far exceeds, the TARP spending program, also enacted under the Bush Administration, in which a $700 billion figure is tossed around for public consumption, usually with a note that much of it has been returned to taxpayers by banks whose profitability has since been restored.) No, what we’re really talking about is the last thirty years of neo-conservative economic ideology, now gearing up to destroy S.S. and Medicare, and herd people into work camps or debtors’ prisons if given half a chance. If not for Senator Bernie Sanders’ efforts, by the way, we would never have learned of the above backdoor bailouts of banks by the Fed.

http://www.huntingtonnews.net/6783

Brown sounds exactly like a Tea Party protester circa 2009. In fact, Brown sounds exactly like a Republican Congressman in the Fall of 2008 - hugely critical of bailing out the banks...BEFORE THE BANKS WERE BAILED OUT. Hell, look at the TARP vote - most Republicans were against the bill.

The OWS protesters have gone far beyond criticizing Wall Street bankers. These people want to punish the anyone they deem wealthy, whether they're a banker or not. Many of these protesters have stated they want to destroy Capitalism and opt for a government that redistributes wealth on a massive scale, and takes care of every citizen's need from cradle to grave.

Let's stop with the phony baloney spin about what these protesters really want.

The Occupiers do not necessarily support Obama. Supporting Obama is not what the protests are about but, you can bet the establishment Democrats will try to high jack the cause.

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