Fed Encourages Bank Speculation that led to Great Recession

Mark Gruenberg

Mark Gruenberg Editor, Press Associates Union News

Yielding to big pushes by the big banks, and the deregulation mania of the GOP Trump administration, the Federal Reserve Board voted on May 30 to let the financiers, in so many words, speculate in derivatives and other shady financial instruments with Mom and Pop’s pension money – and your paychecks.

And that virtual repeal of the so-called Volcker Rule, a curb Congress enacted in the post-Great Recession Dodd-Frank law in 2010, led top consumer and union leaders to hit the ceiling.

“Repealing the Volcker rule is risky public policy, bad for the economy and puts everyone at risk because banks will surely gamble with other people’s money, just as they have throughout history when rules are relaxed,” said National Consumers League Executive Director Sally Greenberg.

“Banks also complain the Volcker Rule is burdensome. Well,  profits have been soaring: The Federal Deposit Insurance Corp. reported last week that U.S. banks had a record $56 billion in profits in the first quarter of the year.”

"We agree with the Rule’s namesake, Paul Volcker himself, who headed the Fed from 1979-87, who said he welcomed ‘the effort to simplify compliance’ with the rule as long as it does ‘not undermine the core principle’ of prohibiting taxpayer-backed banks from engaging in risky proprietary trading.”

“Risky proprietary trading” is what the financiers, knowing the Fed insures deposits, did from the 2000 Gramm-Rudman deregulation law through the 2008 crash. They took Mom and Pop’s pension money and people’s paychecks and plunged it into derivatives, stock options, swaps and the other risky pieces of paper. The collapse like a house of cards led to the Great Recession and its loss of millions of dollars and people’s homes, jobs and pensions.

Which was AFL-CIO President Richard Trumka’s point, too.

 

“The Volcker Rule prevents Wall Street banks from gambling with taxpayer-backed money. Gutting it would be a huge gift to the big banks, their well-paid lobbyists and substan-tially increase the risk that working people will have to bail out the banks again,” he tweeted.

Ever since Dodd-Frank passed, the banks and their financial friends have lobbied to end the Volcker Rule, which they tried – unsuccessfully – to stop in the wake of the crash. Now, they’ve succeeded, said Marcus Stanley, policy director of Americans for Financial Reform.

“This proposal is no minor set of technical tweaks to the Volcker Rule, but an attempt to unravel fundamental elements of the response to the 2008 financial crisis, when banks financed their gambling with taxpayer-insured deposits,” Stanley’s statement said. “If implemented, these proposals could turn the Volcker Rule into a dead letter, a regulation that would not meaningfully restrict trading activities at the banks whose problems could drag down the entire financial system — again.”                

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Posted In: Allied Approaches

Union Matters

Federal Minimum Wage Reaches Disappointing Milestone

By Kathleen Mackey
USW Intern

A disgraceful milestone occurred last Sunday, June 16.

That date officially marked the longest period that the United States has gone without increasing federal the minimum wage.

That means Congress has denied raises for a decade to 1.8 million American workers, that is, those workers who earn $7.25 an hour or less. These 1.8 million Americans have watched in frustration as Congress not only denied them wages increases, but used their tax dollars to raise Congressional pay. They continued to watch in disappointment as the Trump administration failed to keep its promise that the 2017 tax cut law would increase every worker’s pay by $4,000 per year.

More than 12 years ago, in May 2007, Congress passed legislation to raise the minimum wage to $7.25 per hour. It took effect two years later. Congress has failed to act since then, so it has, in effect, now imposed a decade-long wage freeze on the nation’s lowest income workers.

To combat this unjust situation, minimum wage workers could rally and call their lawmakers to demand action, but they’re typically working more than one job just to get by, so few have the energy or patience.

The Economic Policy Institute points out in a recent report on the federal minimum wage that as the cost of living rose over the past 10 years, Congress’ inaction cut the take-home pay of working families.  

At the current dismal rate, full-time workers receiving minimum wage earn $15,080 a year. It was virtually impossible to scrape by on $15,080 a decade ago, let alone support a family. But with the cost of living having risen 18% over that time, the situation now is far worse for the working poor. The current federal minimum wage is not a living wage. And no full-time worker should live in poverty.

While ignoring the needs of low-income workers, members of Congress, who taxpayers pay at least $174,000 a year, are scheduled to receive an automatic $4,500 cost-of-living raise this year. Congress increased its own pay from $169,300 to $174,000 in 2009, in the middle of the Great Recession when low income people across the country were out of work and losing their homes. While Congress has frozen its own pay since then, that’s little consolation to minimum wage workers who take home less than a tenth of Congressional salaries.

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A Friendly Reminder

A Friendly Reminder