The financial industry is still hobbled, yet there is a sense we have already seen the worst. Though employment statistics continue to be grim, the stock market has rebounded from the depths of earlier this year with the Dow Jones Industrial Average now residing a hair above 8000. Predictions are starting to surface that prognosticate the recession will end as the year concludes, though there is acknowledgment that the unemployment rate will likely continue to rise into next year. Even if the wobbly economy hit its nadir in this year's first quarter, there is little reason to pop open champagne. We'll still likely see high levels of unemployment for quite some time, as any near term recovery is likely to be tepid at best. After the recent troubles on Wall Street which required massive government intervention to rescue faltering banks, it would have been reasonable to expect the chastened big banks to behave more responsibly, yet there is scant evidence of this. In fact, the bailed out banks look poised to intitate a whole new round of screwing the little guy.
It is amazing in some respects ordinary Americans haven't flocked to Washington en masse and protested more vigorously the bailouts of the big banks. The Geithner plan that subsidizes private investors to encourage them to buy the banks' toxic assets reeks of Wall Street favoritism. This is too favorable a fate for the big banks after their reckless behavior. One of the rationales used to explain why the big banks had to be rescued by the government is failure by these giant institutions would precipitate a complete economic collapse reminiscent of the Great Depression. This leaves the public at the mercy of these institutions. If things go smoothly, the banks rake in the bucks. But if they are overly aggressive and make too many imprudent loans, the current crisis has taught the banks the government will rescue them. Though Conservatives are loath to admit it, the current nexus between government and Wall Street smacks of socialism. This isn't the kind of socialism that leads to a more egalitarian society, however. It is a repugnant system that privatizes profit for the elite, while socking it to the little guy at every turn.
Everyday Americans are justifiably not amused. They have watched their retirement accounts decline precipitously. The unemployment rate keeps climbing as corporate America reduces headcount to weather the storm. In addition, home values have plunged leaving many Americans owing more than their houses are worth. A good number of Americans are struggling. One of the few positive developments in recent months is declining interest rates. Banks have been the beneficiaries of billions injected by the Federal Reserve. This action was supposed to thaw the frozen credit markets. To coax people to make purchases, one would expect the banks to offer favorable interest rates for credit cards especially given the aggressive interest rate cuts by the Fed. Instead, the banks are increasing interest rates on their credit cards even for long standing customers. It is galling to watch the banks accept the largess of the federal government then turn around and ratchet up the interest rates of customers' credit cards.
Though Obama came to Washington promising change, he has not seen fit to tame the excesses of Wall Street. He has constructed an economics team that is compromised by its many linkages to the big banks. The incestuous relationship between government and the financial sector is unseemly. It leaves one to wonder if the policy being pursued is the best for America or just the best for Wall Street.
The big banks haven't been forced to restructure after their reckless behavior. They are hoarding money injected by the Federal Reserve and have unconscionably increased credit card rates at the same time interest rates have fallen. Unfortunately for Americans, Obama seems to have just as cozy a relationship with the big banks as Bush, which means the banks can continue to expect to get a good deal while most Americans get a raw deal.
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