What should we make of the Occupy Wall Street protest movement that started three weeks ago in a New York park, but that has since sparked similar protests in Boston, Chicago and Los Angeles?
Some US commentators have been quick to criticise the protesters for having too long a list of grievances, stretching from the foreclosure crisis through to student loan debt, healthcare and high unemployment. Critics argue that the protesters are more interested in venting their complaints than in coming up with coherent political demands.
But other commentators believe there is a unified message in the various complaints. The protesters, they believe, are expressing a deep-seated frustration about a US political system that is increasingly being run for the benefit of the financial elites.
The protesters are angry about the increasing wealth the richest members of society now enjoy, and they’re deeply concerned that the financial industry enjoys huge power in Washington by virtue of the fact that it is one of the largest sources of campaign money for both political parties.
The protesters are deeply aware that the US government spent trillions of dollars during the financial crisis bailing out banks, but, when the crisis passed, the financial industry was able to resist moves to introduce tough new regulations and the banks were quick to resume their practice of paying massive bonuses.
What’s more, the crisis has left federal and state governments grappling with massive budget deficits. Overwhelmingly, the solution has been to cut back on spending and to retrench teachers and public servants, rather than to boost tax levels for the wealthiest members of the country.
But it’s not only the anti-Wall Street protesters who are worried about the power that the financial elites wield in Washington.
Sheila Bair, the former head of the Federal Deposit Insurance Corporation — the federal agency that insures bank deposits and winds down failing banks — has openly criticised the way the US government lavished taxpayer money to protect the bondholders of banks and companies such as AIG.
Bair worked with Hank Paulson, then US Treasury Secretary, Timothy Geithner (who was then running the New York Federal Reserve) and US central bank boss Ben Bernanke during the financial crisis.
“They always had the view that the FDIC was not in the same league as Treasury and the Fed,” she said in an extraordinary interview with The New York Times published several months ago.
“As a result, we were rarely consulted. They would bring me in after they’d made their decision on what needed to be done, and without giving me any information they would say: ‘You have to do this or the system will go down.’ If I heard that once, I heard it a thousand times. ‘Citi is systemic, you have to do this.’ No analysis, no meaningful discussion. It was very frustrating.”
In contrast, Bair argued that bondholders should be forced to take some of the losses when a financial institution fails. “Why did we do the bailouts?” she says in the interview. “It was all about the bondholders.”
According to Bair, Paulson, Geithner and Bernanke were determined to prevent bondholders from suffering losses, while the FDIC thought they should. “We kept saying: ‘There is no insurance premium on bondholders,’ you know? For the little guy on Main Street who has bank deposits, we charge the banks a premium for that, and it gets passed on to the customer. We don’t have the same thing for bondholders. They’re supposed to take losses.”
But it now appears that Bernanke feels some sympathy for the anti-Wall Street protesters’ complaints.
Asked about the protests when he appeared before a congressional committee earlier this week, Bernanke replied: “Very generally, I think people are quite unhappy with the state of the economy … They blame, with some justification, the problems of the financial sector for getting us into this mess and they’re dissatisfied with the policy response here in Washington.
“At some level, I can’t blame them,” he added. “Certainly, 9% unemployment and very slow growth — it’s not a very good situation … I’m not taking the protests into account specifically, but I certainly, like everyone else, am dissatisfied with what the economy is doing right now.”
*This article first appeared on Business Spectator