October 19, 2011 |
The economic crash led to the loss of 9 million jobs and the biggest drop in American home-ownership since the Great Depression. Long-term unemployment, poverty and hunger have increased dramatically. People are angry. The Occupy Wall Street movement, a stand against Wall Street's greed, excess and criminality, has captured the imagination and participation of millions across the nation and the globe.
The giant mortgage bubble and the irresponsible and corrupt practices that caused the catastrophic economic crash didn't emerge out of thin air. They were a consequence of decades of pay-to-play politics rife with conflicts of interest; a political system awash in cash and legal pay-offs, designed to undermine the checks and balances that could have prevented the meltdown.
Many of these checks and balances were implemented during the Great Depression. How they were eroded and eventually abandoned is the story of a small group of banks, financial companies and elites involved in major conflicts of interest, revolving-door politics and backroom deal-making -- all to protect the interests of the global elite at the expense of the American public.
Big Finance has a long history of working hard to deregulate the American economic system on behalf of global capitalism run amok. One of its biggest coups was the overturning of the Glass-Steagall Act, a Depression-era law that created a firewall between investment banking and the commercial banks that hold deposits and make loans.
The first victory in the quest to overturn this major protection came in 1986. Under intense pressure from Wall Street, the Federal Reserve reinterpreted a key section of Glass-Steagall, deciding that commercial banks could make up to 5 percent of their gross revenues from investment banking. After the board heard arguments from Citicorp, J.P. Morgan and Bankers Trust, it loosened the restrictions further: in 1989, the limit was raised to 10 percent of revenues, and in 1996, they hiked it up to 25 percent.
Then, according to a report by PBS' Frontline, “In the 1997-'98 election cycle, the finance, insurance, and real estate industries (known as the FIRE sector), spen[t] more than $200 million on lobbying and [made] more than $150 million in political donations” – most of which were “targeted to members of Congressional banking committees and other committees with direct jurisdiction over financial services legislation.”
The following year, after 12 unsuccessful attempts, Glass-Steagall, which would have made the crash of 2007-2009 impossible, was finally repealed. And it was only then that the explosion of shaky mortgage-backed securities began. “Subprime” loans, which made the mortgage system so vulnerable, made up 5 percent of all mortgages in the U.S. the year before repeal, but had skyrocketed to 30 percent of the total at the time of the crash.
The Glass-Steagall act was killed by financial interests seeking to maximize deregulation. The result was a casino-like environment that almost destroyed the U.S. and global economy. The giants of Wall Street enjoyed a massive bailout courtesy of American taxpayers, and they're still hard at work gaming the system, lobbying hard against new regulations that might avert the next bubble-led crash.
AlterNet, in partnership with the Media Consortium, looked at the five banks that exert the most influence on our democracy. Based on their size, the amount of money they spend on campaign donations and lobbying, and the number of employees who’ve gone through the revolving door into public service, or vice versa, we determined which banks have had the worst impact on the country. We’ll rank each one based on our research, and come up with the worst of the worst--the big bank that’s done the most damage to America's economy and society.
A word of caution is in order. This report is based only on what the banks are forced to disclose. It doesn't include lobbying by corporate front-groups like the Chamber of Commerce, and it doesn't include the “independent” campaign spending that has exploded in the wake of the Supreme Court's Citizens Uniteddecision, which corporations are no longer required to disclose to the public. This is a classic story of American political corruption writ large.
Meet the Big Banks