Monday, February 17, 2014

The REAL 'stupidity tax' benefits Wall Street

I admit I'm one of those people who looks down on people who buy lotto tickets and gamble regularly. The house always wins, as they say. It's just not rational to throw one's money away like that. 

Chris Arnade reminds me not to be so condescending. After all, since the American Dream died, statistically speaking, in the 1980s, what is there left except the lottery?

More importantly, Arnade points out the hypocrisy of those who pooh-pooh gambling by the poor, and yet have their bets covered by the U.S. taxpayers. Yeah, I'm talking about the FIRE sector and the Too Big To Fail-Wall Street bailouts.  

Arnade was an investment banker and saw it firsthand, how greed, stupidity -- and I would say criminal fraud -- was rewarded [emphasis mine]:

A few years later Wall Street imploded. Our collective bets made with borrowed money soured, collapsing banks and collapsing the economy. The bank I worked for only stayed solvent because of a government bailout. We were allowed to keep our money and jobs. The cost of the financial collapse to the US economy however was huge, trillions of dollars huge. By one estimate it has cost the average US family between $50,000 to $120,000 (pdf).

That financial crisis hasn't changed Wall Street much. A few rules have worked their way through the system, but extensive lobbying by the financial community is watering them down. The perverse compensation structure that encourages excessive risk taking is still in place. Banks are still too large to fail.

When the next crisis happens, and by the nature of markets, it will happen again, the government will do the only rational thing it can, and once again step in and save the institutions with taxpayer money. The economy will again be wrecked and the average family will again pay the costs.

The bankers won't suffer much, not personally. That's the real stupidity tax, and we are all paying.

And finally, not to sound like a, gee whiz, class warrior, but shouldn't the default assumption be, until proven otherwise, that anybody working on Wall Street is a leech on Uncle Sam's neck?... kinda like conservatives' default assumption that anybody on welfare is a lazy moocher?

By Chris Arnade
February 16, 2014 | Guardian

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