Declaration of Independence from Wall Street
Our local paper printed a copy of the Declaration of Independence this morning. It's interesting reading -- 56 citizens of the-then-13 British colonies signed their names to a document declaring that the King was abusing the colonies and violating basic principles of human decency. So they declared the colonies' independence from Great Britain -- quite a gutsy move. 233 years later it looks to me as though the role of King in 1776 is being played by Wall Street.
To be fair, Wall Street is not as bad as the Britain's King was back then. Those 56 patriots complained that he was taxing them without representation, over-ruling the laws they created for themselves, posting standing armies and encouraging Native Americans to stir political instability, cutting off trade, blocking immigration and a whole host of other crimes against their efforts at self-governance.
Even though Wall Street is not as bad, it does behave regally. How so? As I posted, in the last decade it's paid $5 billion to Washington politicians and lobbyists. And so it's been able to tax us without representation -- because it has effectively purchased what is supposed to be our government.
Wall Street taxes us in many ways. Most recently its excesses have contributed to a $50 trillion loss in stock market value and the collapse of huge financial institutions.
But thanks to Wall Street's regal power, it has commanded our government to put $12.8 trillion worth of taxpayer money to work keeping the global financial system from collapsing before our eyes. And billions of that money has gone to paying bonuses to the very bankers that created this catastrophe. This year, those taxpayer-subsidized bonuses could hit a new record.
But Wall Street is also using its regal authority to keep in place all sorts of regulations that tax society. For example, banks are raising credit card interest rates, fees, and other banking charges on those who are struggling to repay their debts. Wall Street has preserved the practice of securitization -- which fueled its huge profits and led to the $13 trillion market for mortgage-backed securities and collateralized debt obligations that contributed so heavily to the financial system's recent collapse.
I could go on, but you get the picture -- Wall Street, not its citizens, rules America. I doubt we need a new American Revolution to make Wall Street a good corporate citizen. We just need to regulate Wall Street so it returns to the 4 percent of the economy that it occupied when it was working well for the U.S. instead of the recent 9 percent choke-hold of its 168,600 employees -- 0.1 percent of our population -- to the detriment of the other 306,662,349 U.S. citizens.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing.