The Looting of America

LesLeopold

Sea Change Co-Host Francesca Rheannon speaks with Les Leopold about his new book, THE LOOTING OF AMERICA: How Wall Street’s Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity — and What We Can Do About It. And this week’s Sea Change ViewPoint comes from Arvind Ganesan of Human Rights Watch, who brings us a commentary on a new HRW report on how oil wealth fuels corruption and human rights abuses in Equatorial Guinea.

[amazon-product]1603582053[/amazon-product]On July 16 the New York Times reported, “A new order is emerging on Wall Street after the worst crisis since the Great Depression.” The article pointed to soaring profits by Goldman Sachs and JPMorgan Chase. A few days later, Bank of America exceeded earnings expectations. Altogether, Bank of America, JPMorgan Chase and Citigroup, the three biggest US lenders by assets, reported a total of $10.2 billion in profits for the second quarter.  Wall Street ate it up, with the Dow Jones now up more than 2000 points from its February low and the S&P 500 up 40 percent.

But something else is also going up — and that’s the unemployment rate, now at its highest level in a generation, with 25 million out of work. What’s going down is real wages — unless you’re a CEO. The banks, for example, are taking a hefty slice out of their huge profits for big payouts to their staff.

Is there a connection between big profits on Wall Street and continued suffering on Main Street? Les Leopold explores that question in his new book, THE LOOTING OF AMERICA: How Wall Street’s Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It. He argues that the meltdown was caused by an income distribution that’s wildly skewed. The ratio between the top CEO salaries and the bottom rung of workers wages went from 40:1 in 1970 to almost 1800:1 in 2006. That resulted in an excess of capital from the top hungrily seeking outsized profits from speculation (what Leopold calls instruments of financial mass destruction) instead of investing in the real economy. He says it’s something like fantasy baseball.  And when the season players — the banks — went on strike, the whole house of cards came tumbling down.

The interview starts with Leopold defining the term “moral hazard,” and then shifts back to 1994 Senate testimony by James Bothwell of the Government Accountability Office on protecting investors from “unscrupulous brokers.”  Leopold hearkens back a bit further, to the late ’70s and early ’80s, when free market religion took hold with the promise of trickle-down economics raising all boats.  As the recent financial meltdown demonstrates, this promise never bore fruit, but instead led to increasing wealth disparity.

Leopold also defines and explains derivatives and other esoteric investment mechanisms that underpinned the meltdown. The interview ends with Leopold describing the importance of unions in stabilizing the economy.

Listen to the complete 40-minute interview on Writer’s Voice, the other show that Francesca Rheannon hosts and produces.

About Bill Baue

Bill Baue is Co-Director of Sea Change Media, a non-profit that makes connections in the shift to social, environmental, and economic sustainability. He co-hosts/produces Sea Change Radio, a nationally syndicated show that podcasts globally.