Wall Street bankers are strutting around like little banty roosters these days, crowing about the phenomenal profits their banks are raking in.
Citigroup has just announced that its profits for just the first three months of this year totaled an incredible $4.4 billion, Goldman Sachs’ haul was $3.5 billion, JPMorgan Chase grabbed $3.3 billion and Bank of America took $3.2 billion. Top bankers are cock-a-doodle-doing over these numbers, claiming that such results prove what geniuses they are, how essential they are to America’s financial health and, of course, how deserving they are of their multimillion-dollar bonuses.
Before they choke on their own hubris, however, let’s note that a huge chunk of these profits are taken directly from a massive, little-known subsidy slipped to them by Ben Bernanke and other regulatory sweethearts in our country’s Federal Reserve system. The Fed has deliberately held short-term interest rates to historic lows – less than one half of a percent. Meanwhile, the Treasury Department is paying almost 4 percent interest on longer-term loans that banks make to the government.
This might sound complicated, but it’s really a very simple transfer of public wealth to the giant banks. The Fed loans, let’s say, a billion dollars to a bank at a half-percent interest. The bank then turns right around and loans that billion dollars to the Treasury Department, collecting 4 percent interest. In short, boys and girls, the banks take our money and loan it back to us for a sweet 3.5 percent profit. Sheer genius!
One wonders: Do bankers wear ski masks when they make these transactions?
By holding interest rates to nearly zero, the Fed is also allowing bankers to steal directly from us depositors and consumers. How much are you earning on your interest-bearing checking account? Chase banks are paying a whopping 0.01 percent. This means that if you keep a $5,000 balance in that account for a year, Chase will pay you 50 cents. Fifty cents to use your money for a year!
Now, try to get a consumer loan from that same bank, and it’ll sock you with about 6 percent in interest. It doesn’t take much genius to rack up profits with an interest rate spread of 5.5 percentage points – a spread that our government continues to hold at record levels.
In other words, Washington is holding the door open for Wall Street to rob us. At the same time, Wall Street has been able to stall and dilute even the modest consumer protections proposed by President Obama. How do bankers keep getting away with this ongoing robbery? In part, by using another door – the revolving door between Washington and Wall Street.
What do such former congressional leaders as Dick Armey, Bob Dole, Dick Gephardt, Dennis Hastert and Trent Lott have in common? Each is a lobbyist for Wall Street banks and other financial powerhouses. They are among the 70 former Congress-critters that watchdog group Public Citizen found lobbying for bankers last year.
Also, 56 former staffers on the House or Senate banking committees have spun through that same revolving door to become finance-industry lobbyists. These Washington insiders are now drawing six- or seven-figure annual paychecks for using their congressional connections to stop reform and enable more Wall Street thievery.
Especially cynical is Dick Armey, who was House Republican majority leader back when Congress was so enthusiastically deregulating Wall Street, giving the green light to the explosion of banker greed that has now crashed our economy. Armey was subsequently rewarded with a multimillion-dollar career as a lobbyist.
While loyally serving his special-interest clients, Armey also became head of a corporate-funded political front group named FreedomWorks. Wearing this hat, Armey-the-lobbyist financed and organized various tea bag rallies, whipping up a frenzy of anti-government anger, which he has twisted into a lobbying campaign to help kill Wall Street reforms.
So, he uses people who are legitimately angry at Washington’s meekness toward Wall Street to create more congressional meekness. Thus, the thievery continues, while public cynicism and anger toward government grows hotter – and the thieves just smile.
Jim Hightower is a national radio commentator, columnist and author.