Lisa Simpson
Oct 29,2009
In: Bank Foreclosures

Bailout Opens the Way for Wall Street to Wallow in Wealth Again

The bailouts have opened the way for Wall Street to wallow in wealth once again while the economy continues to totter. Many citizens are wondering how this is possible. How is it that some banks are swelling with profits while millions are concerned about loss of jobs and homes?

It will surprise many that one of the driving forces triggering this rejuvenation in Wall Street is not trading but it is Washington. Many of the measures adopted by the policy makers in 2008 in attempting to bring back the financial infrastructure back to its feet by reducing interest rates to nearly zero, pepping up jumbo banks with money from the taxpayer’s kitty, guaranteeing debts of financial institution running into billions helped to fix up the stage for new golden age for Wall Street.

The financial moguls Goldman Sachs and JPMorgan Chase are spiralling to new heights of profit making trading in stock sand bonds rather than by dealing in the dull business of lending the man in the street money. They are also profiteering by seeing to it that their weaker competitors are shouldered out of the race after the collapse of many investment firms in 2008.

Meanwhile the banks are fighting tooth and nail efforts by the Congress to bring down the industry within the purview of new regulations. Curbs are being attempted to be put on the pay packets of executives. But despite this Wall Street has good reason to thank Washington for their recent spike in wealth.

Gary Richardson of National Bureau of Economic Research said, “All of this is facilitated by the Federal Reserve and the government, who really want financial institutions to get back to lending. But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them. I have big concerns about that.”

All the banks however have not been lucky. Citigroup and Bank of America whose activities are more concerned with the fate of ordinary consumers are fighting to survive; so too are a good number of regional banks. The total failure of strong rivals like Lehman Brothers has made it possible for power and wealth to be concentrated in the bands of few. Being stronger they can now squeeze out more gains like charging exorbitant fees for a broad range of banking related services.

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