Читать книгу This Fight is Our Fight: The Battle to Save Working People - Elizabeth Warren - Страница 24

Trickle-down ideology started with raw power: the powerful devised ways to exercise even more power. With fewer regulators to say no, big corporations began venturing into territory that had long been closed to them. Wall Street firms showed the way. For years they had chafed under the restrictions put in place in the 1930s, and they had fought back from the beginning. But now, one battle at a time, they began to win. Big banks were turned loose to load up on risks. Those risks boosted both revenues and profitability, and—no surprise—the executives cashed their paychecks, pocketed their bonuses, and didn’t ask too many questions.

The jump in profitability was like a cocaine high—it felt amazing while it lasted, but it was potentially deadly. Risks always come back to bite someone. The CEOs knew that, but they expected they could grab their money and get out, and the drug would keep working. And if it all came crashing down, everyone else, including investors, customers, and taxpayers, would be left holding the bag.

A banking scandal that erupted in the late 1980s should have sounded a warning. The country’s savings and loans associations, once sleepy little consumer banks that specialized in mortgage lending, were largely deregulated in 1982. They immediately started growing, offering bigger and bigger loans and many more new products. In just three years, the S&Ls jumped 50 percent in size, and speculators began buying them up as if each one was a goose that could lay golden eggs. But no bubble lasts forever, and soon many of the high-flying, poorly regulated S&Ls became insolvent. When the bubble popped, more than a thousand of the nation’s 3,200 S&Ls were shut down. And, in a show of real accountability, government regulators criminally prosecuted more than a thousand bank executives.

Because the S&Ls were relatively small and because the problems rolled from region to region over time, they didn’t crash the entire economy. But to keep the system functioning and keep depositors from losing any money, U.S. taxpayers laid out about $132 billion. Yes, $132 billion. Stop for a minute and think about that pile of money: in 1995, when the last S&L was shuttered, the federal government had funneled more to these financial institutions than it had spent on education, job training, veterans’ benefits, social services, and transportation combined.

At this point, alarms should have been sounding everywhere—shrieking sirens and clanging bells. The pattern was unmistakable: (1) bank deregulates; (2) bank loads up on risk; (3) crisis occurs; (4) bailout follows.

The S&L scandal should have screamed at regulators and Congress to pay attention and tighten up bank regulations. If they had, the next round of problems with banks crashing the economy would have been stopped before it started. But the politicians didn’t want to hear it. (I guess it’s hard to hear when your ears are stuffed with money.) The banks—particularly the giant banks—kept pushing for less and less oversight, and the politicians followed right along.

Instead of sobering up in the aftermath of the crisis, the big banks charged ahead. Their target: Glass-Steagall. Licking their chops over the chance to combine boring banking (and all the money in those checking and savings accounts) with high-risk financial speculation, the banks lobbied to pull down one of the pillars of our financial system. And they didn’t worry about the fallout. They figured that if anything went wrong, the government would step in and make sure that all those little depositors were protected—and in the process, the government would protect the big banks as well. Throughout the 1980s and into the 1990s, high-paid lobbyists aggressively attacked a wide array of financial regulations. Over time, they targeted one brick after another in the wall that separated banks from Wall Street trading, and, over time, the bank regulators caved in again and again. In 1999, the few remaining provisions of Glass-Steagall were repealed.

The results were immediate. Big banks grew into giant banks, and giant banks grew into monsters. In 1980, the ten biggest banks in America controlled less than one-third of the market; by 2000, they had captured more than half the market, and by 2005, their share had risen to almost 60 percent. By 2008, just five uber-banks controlled 40 percent of the market. Through it all, bank CEOs displayed a boldness that would have put a medieval royal prince to shame.

Take a look at just one example. In 1998, when Citicorp decided that it wanted to merge with a giant insurance company, the two corporations faced a teeny-tiny problem: the merger would be illegal. Such a bank-nonbank merger would violate the existing provisions of Glass-Steagall and other banking laws that had been in place since the 1930s. But why should these princes of finance let mere federal law slow them down? Laws were for the little guys, and these CEOs were bound for greatness. If the two companies joined together, it would be the biggest merger in history. The two finance giants reflected a bit, and then very deliberately, very publicly, and very illegally, they merged their companies, confident that a compliant Congress would change the law after the fact.

And, wow, did they get it right: a subservient Congress did just what it was told to do. In 1999, after the repeal of Glass-Steagall, the big-time financial world got even riskier and—for a while—even more profitable.

In the same way that some Republicans had signed on for greater regulations in earlier decades, some Democrats now got on the deregulation bandwagon big-time. As he signed the repeal of Glass-Steagall, President Bill Clinton cracked a few jokes, then praised the move for “making a fundamental and historic change in the way we operate our financial institutions.” He had fought for the repeal, and now he claimed victory: “It is true that the Glass-Steagall law is no longer appropriate to the economy in which we live.” As he presciently explained, it will help “expand the powers of banks.”

AROUND THE TIME Congress and the bank regulators were rolling over and playing dead for the big banks, I was in Massachusetts, teaching at Harvard and studying another sign of danger in the American economy: during the 1990s, American families had been loading up on debt. Credit card companies were making their products more and more complex. Credit card agreements that back in 1981 had been about a page and a half long had morphed into contracts that ran to thirty pages of tiny type by the early 2000s. Increasingly, the agreements were larded with obscure legal terms, hidden tricks, and bizarre accounting practices. Ultimately, some members of Congress became concerned. During one hearing, laughter broke out as credit card executives were called on to explain certain incomprehensible terms.

But there was nothing funny about the effects of this rising spiral of debt on working people. Banks and credit card companies encouraged families to get in way over their heads, and predatory contracts trapped people into years of staggering fees and astronomical interest rates. Credit cards were handed out like candy, and they soon began producing tens of billions of dollars in profits for their issuers. Newspapers and radios regularly reported lighthearted stories about a baby, a dog, or a cat that had been issued its own preapproved card.

The numbers I was coming up with in my research were so alarming that I started looking for more ways to get the word out—speeches, articles, op-eds, interviews, and pretty much anything else I could think of. One day in 2005, I got a phone call and was asked a surprising question: Would I please come to Washington to meet with the regulators at the Office of the Comptroller of the Currency?

Woo-hoo! This was the big-dog bank regulator, the cop that had authority to tell many of the biggest credit card issuers in the country to cut it out. Really. This was an agency that could eliminate tricks and traps from millions of credit cards. Oooh, this could be fun.

I flew to Washington on a cloudy February day. I’d never been to the OCC offices, which were sleek and modern. The acting comptroller, Julie Williams, welcomed me in the lobby and waved me through security. Upstairs, we visited for a few minutes in her office, which was outfitted with elegant modern furniture. No standard-government-issue, banged-up stuff here. Everything had a cool, well-designed look.

Acting comptroller Williams—“call me Julie”—was tall and thin, with a fashionably short haircut and an elegant cashmere jacket. She had ramrod-straight posture and an intense stare. She always kept her voice at a low volume, but every word was carefully weighed and measured for maximum impact. Here was a woman who would never disrupt markets with so much as a misplaced syllable.

Julie led me to an elevator and then to a large conference room, where she introduced me to a big group of OCC economists and bank supervisors. In these pre-PowerPoint days, I had assembled a presentation that relied on transparencies and an overhead projector. For over an hour, I carefully went through my data. First I demonstrated the increasingly precarious position of millions of American families; next I provided abundant evidence that the banks were boosting their profits by tricking many of the people who were borrowing money from them. Even when giving an academic presentation, I could get pretty wound up—and even in a room full of sober government officials, I didn’t hold back. Cheaters are cheaters.

The economists and supervisors had lots of questions. They were engaged and thoughtful, and I stayed until the last person had asked the last question. Finally I picked up my slides. I was exhausted, and I needed some water.

Julie and I headed back to her office to pick up my backpack. As we stepped into the elevator, she said that I had made a “compelling case” that credit card debt was creating serious problems.

For a moment I closed my eyes: yesssss! My fatigue evaporated. This was exactly what I wanted: the regulator in chief had recognized that there was a problem! I couldn’t wait to hear her confirm that she would put some of the OCC’s thousands of employees to work investigating these shady practices and reining in some of the predators. I had worked so hard on these data, and now they were going to have an impact. I was ready to break out my dancing shoes.

Then Julie gave a small, sad smile. She said it was just too bad.

I waited several seconds, and when she didn’t say anything more, I said, “Uh, yeah, it’s too bad. But you can stop it.”

“Stop it?” She jerked back as if the thought had never occurred to her. “Why would we do that?”

Well, because it’s wrong? And because millions of people are getting hurt? And because it’s dangerous for banks to build their profits by cheating people? And, finally, because this is the sort of financial adventure that usually ends very badly for both the banks and the economy?

Again I pointed out that the OCC—her agency—had both the power and the responsibility to shut down these dangerous practices.

“Oh, we can’t do that,” she said evenly.

As we headed to the lobby, I started to press her. I figured this might be my last chance. “Of course you can do it,” I said. “You have the authority, you are responsible, you can make a huge difference in people’s lives.” As I made my case, my voice started to rise.

She smiled. “No, we just can’t do that. The banks wouldn’t like it.”

The banks wouldn’t like it.

What? Are you kidding me? I almost didn’t believe what was happening. I knew this was the Bush administration, but gimme a break. Who cares if the banks don’t like it? You don’t work for them. You work for the American people—for the people who are getting cheated. I was so furious my hands were shaking.

Julie never raised her voice or broke her smile. Instead, she walked me through the lobby and said good-bye. So far as I know, neither she nor anyone at that entire agency ever followed up on anything I said that day.

And I know for sure they never invited me back.

But it wasn’t just the bank regulators who fell down on the job. Other government agencies also competed for their place in a book that could have been titled Profiles in Cowardice. In the 1980s, the SEC began the shift from sending out aggressive regulators to letting the big financial players police themselves. By the time I was making my presentation to the OCC in 2005, the SEC had effectively neutered itself. As investment banks gobbled up more and more risk, the SEC put in place voluntary regulations, and then the SEC chair said that the banks were free to comply with these regulations—or ignore them.

Voluntary regulations? Jeez, can you imagine Tony Soprano in a world of voluntary regulations? All these years later, I want to scream at the SEC, “What was wrong with you guys? You were supposed to be on the side of the people!” But that, of course, was the very root of the problem. The SEC had absorbed the message of deregulation that the agency’s job was to serve the investment industry.

And, boy, did they serve the industry. The SEC’s ineffectiveness became legendary. A former SEC chair described the commission’s enforcement division as “handcuffed.” Its agents couldn’t even detect a plain old-fashioned Ponzi scheme—the kind that had been around since the 1920s and that even the dullest cop on the Wall Street beat was supposed to be able to sniff out from a mile away. Despite repeated warnings, the SEC completely missed the Bernie Madoff scandal, the largest financial fraud in U.S. history. Waking up only after the scheme—which lasted years, maybe even decades—had collapsed and people who had trusted him and given him their savings had lost more than $17 billion, the SEC was widely seen as willfully blind. Or, as journalist Matt Taibbi put it, the SEC appeared “somehow worse than corrupt—it’s hard to find the right language, but ‘aggressively clueless’ comes pretty close.”

During the same period, antitrust enforcement also began to fade, dropping sharply in the Reagan and Bush Sr. years. It ticked up during Democratic administrations, but not nearly enough to keep up with the growing numbers of mergers and dominant corporations in many markets. The government policemen formerly known as trustbusters seemed as eager as everyone else to embrace the new motto in Washington: Let the big guys do whatever they want.

Industry consolidation took off. In one market after another, a handful of competitors dominated.

 By the 2000s, the number of major U.S. airlines dropped from nine to four. The four left standing—American, Delta, United, and Southwest—now have over 80 percent of all domestic airline seats in the country.

 Two beer companies sell more than 70 percent of all the beer in the United States.

 Five giant health insurance companies now own more than 83 percent of the country’s health insurance market.

 Three drugstore chains—CVS, Walgreens, and Rite Aid—now manage 99 percent of all pharmacies in America.

 Monsanto holds the patents for about 93 percent of all the soybeans and 80 percent of all the corn planted in the United States each year.

 Four large companies now run nearly 85 percent of the U.S. beef market.

 Three big companies now produce almost half of all chickens.

The list goes on and on and on.

Giant corporations now dominate much of our lives. Why does this matter? Because when a handful of giants dominate, markets don’t work very well. The whole free-enterprise system is built on the idea that when markets are competitive, we’ll get lower prices, better services, cool new innovations, and many other benefits as companies vie for our business. Antitrust laws help keep markets strong.

The impact of consolidation is everywhere. Prices go up: as Monsanto has dominated seed production, corn seed prices have risen 135 percent since 2001. Small competitors face an uphill battle: craft brewers are having a tough time challenging the giant beer companies. Same with drugstores. The meat monopoly has hit in all directions: consumers are paying more, farmers are earning less, and profit margins for Tyson Foods, the nation’s biggest meat producer, are breaking all records.

Or think about the cable industry. Giant cable companies prefer to control most of their markets, which gives them the chance to boost their profits by raising prices, delivering inferior products, and providing lousy services—all at the same time. In Massachusetts, nearly two out of three towns have only one cable provider, and most of the rest have only two. That’s why I fought the merger of Comcast and Time Warner—number one and number three cable companies. (That’s a fight we won!) If you’re one of a handful of big corporations, why compete with one another when you can divvy up the markets, charge customers until they beg for mercy, and make much higher profits?

I’ll sing the song again: Markets without rules don’t provide value to customers and don’t work for small businesses, but they make the big guys as happy as pigs in mud.