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2013-12-27

The Other 98% Urges Wall Street to Donate $91 Billion in Bonuses to Victims of Financial Crisis

Guests

Alexis Goldstein, communications director at The Other 98%. She worked for seven years on Wall Street as a computer programmer at Morgan Stanley, Merrill Lynch and Deutsche Bank.

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The Dow Jones Industrial Average and the S&P 500 both hit record highs on Thursday while the NASDAQ surged to its highest level in over 13 years. The year-end rally is expected to add a boost to the massive bonuses Wall Street is preparing to hand out this year. The largest Wall Street firms have reportedly set aside more than $91 billion for year-end bonuses. In response, an activist group called The Other 98% has launched a petition calling on employees of Chase, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley and Bank of America to donate their bonuses to the 10 million Americans made homeless by the housing crisis. We are joined by Alexis Goldstein, a former computer programmer at Morgan Stanley, Merrill Lynch and Deutsche Bank who later got involved with Occupy Wall Street and is now communications director at the group, The Other 98%.

Transcript

This is a rush transcript. Copy may not be in its final form.

JUAN GONZÁLEZ: Thursday was another record-setting day on Wall Street. The Dow Jones Industrial Average and the Standard & Poor’s 500 both hit new highs while the NASDAQ surged to its highest level in over 13 years. The year-end rally is expected to add a boost to the massive bonuses Wall Street is preparing to hand out this year. The biggest Wall Street firms have reportedly set aside a whopping $91 billion for year-end bonuses.

AMY GOODMAN: Meanwhile, a spinoff of Occupy Wall Street called The Other 98% has launched a petition calling on employees of Chase, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley and Bank of America to donate their bonuses to the 10 million Americans made homeless by the housing crisis.

We’re joined now by Alexis Goldstein in Washington, D.C. For seven years, she worked on Wall Street as a computer programmer at Morgan Stanley, Merrill Lynch and Deutsche Bank. She later got involved with Occupy Wall Street, now is communications director at The Other 98%.

Welcome back to Democracy Now!, Alexis.

ALEXIS GOLDSTEIN: Thanks for having me.

AMY GOODMAN: Well, talk about your recommendation for what these bankers should do with their bonuses.

ALEXIS GOLDSTEIN: Sure. So you had on Laura Gottesdiener, who’s the author of A Dream Foreclosed, earlier this year. And she has said that 10 million people were displaced during the foreclosure crisis, often due to predatory loans. These were mortgages that were sold that had rates that were bait-and-switch rates. And so our suggestion is quite simply that they should take this money and do something about the lack of affordable housing, which we think is a problem that they caused, because they have essentially thrown so many people wrongfully out of their homes.

And so, we had a proposal to take $60 billion and fund something called the National Housing Trust Fund for two years. This is a program that was actually created by George Bush in 2008. It’s a program that, if funded at $30 billion for 10 years, could end homelessness in America. But this program has been yet to be funded. And so, we’re saying that Wall Street could take $60 billion out of their bonuses and help get this ball rolling and fund that program for two years.

And then our next suggestion was essentially to take care of the $21 billion in needed repairs to public housing. Right now the federal government only allocates less than $2 billion a year to do these repairs, and so what ends up happening is about 10,000 units of public housing fall out of the inventory every year, so we have less and less affordable housing. So that’s our second suggestion.

And then I suppose they could take the $10 billion remaining, and I suppose they could dole the rest of that out. But those were our two suggestions.

JUAN GONZÁLEZ: And, Alexis, how is it possible that the Wall Street firms have been able to accumulate so much in bonuses, given the fact that the recovery here in the—economic recovery here in the United States is still so sluggish, still over 7 percent unemployed, and the reports the last few days that Christmas shopping among Americans was hardly what the financial community expected?

ALEXIS GOLDSTEIN: It’s a great question, Juan, and I think there’s two answers. One is, Bloomberg earlier this year did a study that said that there’s an $83 billion-a-year subsidy coming from the government and flowing into Wall Street. And that comes from the cheap cost of borrowing that they get directly from the Federal Reserve, and it also comes from the fact that the people that loan Wall Street money assume that the government would bail them out again if they ever got into trouble, and so they loan them money at a lower rate than they would to a bank that they don’t see as too big to fail. So, $83 billion of government subsidies every year, a big chunk of that, I guess, they’re just putting right back into their pockets and giving out in bonuses.

And I think another reason that they’re doing so well is they continue to commit crimes that are very profitable. There was a huge settlement this year with JPMorgan that was a $13 billion settlement, that was the result of mortgages that they sold during the crisis that were very shady and were misrepresented. Investors actually lost $26 billion on that, so $13 billion sounds like a big settlement, but it’s actually just a fraction of the money that people lost. But then you have things like JPMorgan manipulating electricity markets and charging consumers in California more money than they should be, because they’re manipulating the market. We saw credit card fraud. We saw JPMorgan fined for that, to the tune of $300 million. So I think the second answer to the question is, they’re still doing things that are criminal that actually happen to be highly profitable.

AMY GOODMAN: You talk about FT magazine’s "How to Spend It."

ALEXIS GOLDSTEIN: Yes. So, there’s a magazine that comes out 30 times a year in the Financial Times as a hard copy, and it also has its own website, just howtospendit.com. And it’s kind—it looks like a parody. It’s kind of shocking. But it’s a real thing. And they profile $20,000 watches. They profile gadgets that you can buy, like a $50,000 diamond-crusted iPhone case. And, you know, they profile all sorts of very fancy, very expensive cars. But this is a real magazine that exists to sort of instruct, I suppose, the wealthiest of Wall Street bankers how they can spend their opulent bonuses each year.

AMY GOODMAN: Can you talk about the bonuses that are being considered?

ALEXIS GOLDSTEIN: Well, so it’s important to remember that these employees on Wall Street get a base salary, and the base salary that they get is usually in the range of about $150,000, and it goes on up from there, especially if you’re a higher-level employee. So the bonuses are often, you know, 100 percent of the base salary, but all the way up into the millions of dollars for very profitable traders. And so, these are people that are making a salary that is far above what the average American makes already. And then they—you know, depending on where they are in the bank and if they’re a trader or somebody more on the operations end—might get something in the tens of thousands or hundreds of thousands, all the way up into the millions. So it really depends on where people sit in the bank. But I think the key point to remember is, these are not people that are, you know, living hard on their salary. Their salaries themselves are very generous, and the bonus is just the icing on the cake at the end of the year.

JUAN GONZÁLEZ: I wanted to ask you about one of the chief reforms that came out of the financial crisis, the so-called Volcker Rule that President Obama touted repeatedly and that is now in the stages of being finally implemented. We’re talking now five years after the crisis, or six years. And what is the Volcker Rule? And how is it being implemented? And what are the financial firms doing to—already, to try to challenge it or to rein in its worst aspects, as far as they’re concerned?

ALEXIS GOLDSTEIN: Sure. So the Volcker Rule came out of the financial crisis, and it was part of a law called Dodd-Frank, which was this very long law that tried to tackle all of the various problems that led to the financial crisis. The Volcker Rule says that banks that enjoy government backing and FDIC insurance don’t get to gamble anymore. If they want to do trades, they have to do trades on behalf of their clients, and they don’t get just to buy something because they think it’s going to skyrocket in price in the future. And the logic behind it was, a lot of these banks—Citigroup one of them, Merrill Lynch another—bought up a lot of these mortgage-backed securities and other mortgage derivative products, and essentially held onto them because they thought they were going to go up and up and up forever. And they ended up losing a ton of money as a result of that. They sold a lot of loans that were—sold a lot of these that were very—ended up being fraudulent. And so, the basic idea is, look, if you’re going to have taxpayer backing at the end of the day, if you’re going to have FDIC insurance, you shouldn’t get to gamble. And that’s what the Volcker Rule is about.

But like any law that is put forth these days, Wall Street lobbied very hard to try to water it down, very hard to try to have exceptions. And so, one of the exceptions, essentially, to the rule is, look, you shouldn’t be able to own a hedge fund if you’re a Wall Street bank or a private equity fund, because you could just gamble through that hedge fund. So they put a 3 percent cap on the amount of a hedge fund or amount of a private equity fund that you could own. But there are different ways around that. And there are certain things that don’t count towards that 3 percent cap. And one of those happens to be a fight that we’ve been having for a while about taxation. So if you remember back in the presidential campaign, Mitt Romney was—it was revealed that he paid a very low rate in taxes. And that has to do with something in private equity, in the way that private equity managers are paid. They’re paid basically through something called carried interest. And carried interest is essentially a sharing of the profits that the private equity fund makes. And the arguments that people like Mitt Romney make for why that carried interest should be taxed at a lower rate is that they say it’s ownership in the fund. But in the Volcker Rule, carried interest is not considered ownership, and because of that, it doesn’t count towards that 3 percent cap that I mentioned. And so, that’s just one example of an exemption in the Volcker Rule that I fear could be exploited by the banks.

I do think there’s a silver lining there, though. If we can get five financial regulators—and that’s how many regulators worked on this rule—to agree, which they have agreed, that carried interest isn’t ownership, then it seems to me that Congress has no excuse not to change the way it’s taxed. And it should be taxed the same way a salary is taxed and the same way that wages are taxed. So I suppose there’s a small silver lining in that exemption.

AMY GOODMAN: When people ask, "Where is Occupy today?" well, one of the places it is, it’s right here around this issue. Occupy Wall Street sent a 325-page comment on the Volcker Rule. The document was cited 284 times in the actual rule. Alexis, talk about that document that you were key in helping to write.

ALEXIS GOLDSTEIN: So there were about seven of us that worked on that. I was one of the seven. And we really tried to identify every single place that we could find where Wall Street would exploit a loophole or run around the rule. And so, we made a series of recommendations. We made a number of recommended changes in the language of the law. And, you know, for the most part, I think most of our recommendations weren’t taken verbatim, but essentially what happened is the banks would argue for something that was super-deregulatory; the group that I was a part of, Occupy the SEC, would argue for strengthening the rule; and the regulators essentially, for the most part, chose something in the middle and made both sides unhappy. But I see it as a victory, because the needle didn’t move towards Wall Street, which is what normally happens. Normally, we just see watering down. And there were a couple of cases where they actually did take on the recommendations that were made. And so, I think that this was a real victory for the public having a voice in the process and having a voice in these laws and regulations that are normally completely dominated by Wall Street interests, and essentially they get to write their own rules. And so, we were able to move the needle a little bit in the right direction in this case because of that letter.

JUAN GONZÁLEZ: I wanted to ask you about another issue that I’m sure is going to come up in Congress in 2014, which is the issue of the huge amounts of profits that U.S. corporations are holding overseas, because they don’t want to repatriate them and have to pay full tax by bringing them back into the country. There’s all kinds of talk, even in the Obama administration, about some form of a tax amnesty. I’m wondering what you think—your sense is, what’s going to happen with this issue in 2014?

ALEXIS GOLDSTEIN: I think, unfortunately, the interests are not—you know, the odds are not in our favor. I think that there’s a very, very strong push to continue to allow these loopholes to exist. I am somewhat optimistic, because we do at least see talk from the Obama administration about addressing income inequality, and it seems to me that if you’re going to truly meaningfully address income inequality, in addition to raising the minimum wage, you need to close some of these tax loopholes. So it does seem to be a logical extension of what the president has called the most important issue of our time. However, you know, it’s one thing to say that in a speech; it’s another thing to make policy changes to the tax code. I’m encouraged that we could see policy changes to tighten these loopholes that allow them to shift things overseas, but again, it’s always an uphill struggle, because you tighten one loophole, and then they lobby to open up another one. So I suppose I would say that I was cautiously optimistic that we’ll see some changes, but I’ll be watching it closely, and I certainly remain skeptical.

AMY GOODMAN: Alexis, I wanted to ask you about, before we end, a satirical video that The Other 98% posted around the oil giant Exxon. Let’s go to a clip.

ALEXIS GOLDSTEIN: Yes.

THE OTHER 98% AD: Here at Exxon, we hate your children. We all know the climate crisis will rip their world apart, but we don’t care, because it’s making us rich. That’s right. Every year, Congress gives the fossil fuel industry over $10 billion in subsidies. That’s your tax dollars lining our pockets. Making a fortune destroying your kids’ future, at Exxon, that’s what we call good business. ExxonHatesYourChildren.com.

AMY GOODMAN: Alexis Goldstein, talk about it.

ALEXIS GOLDSTEIN: So, this was essentially our way of bringing to light the very real fact that ExxonMobil is a huge contributor to climate change. They are really wrecking the planet for all of us. You know, we blew past 350 parts per million of carbon. We’re at 450 parts per million of carbon. And this is a corporation that receives $10 billion a year—that’s a low end of the estimate. Some people believe the estimate for oil companies is as high as $52 billion. And so, this is a company that not only receives a huge amount of government assistance, they continue to operate as if they are a good corporate actor. And I think if you took into account all of the externalities—and by that I mean climate change, all of the natural disasters that we’ve seen, you know, increasing temperatures, extreme weather—this is a corporation that cares more about profits than they do about all of us living here on this planet.

And so, we were trying to poke fun at that. They actually filed a cease-and-desist letter with Comcast so that we couldn’t air this as we wanted to right before the State of—the president’s State of the Union earlier this year. So, they definitely noticed. So—but I think that this was very effective. And it’s tongue-in-cheek, but it’s also quite serious. I mean, I think they really do hate all of us and hate our children. They certainly like their money more than they like all of our children.

AMY GOODMAN: I mean, President Obama called for an end to those tax subsidies, hasn’t he? But where has it gone?

ALEXIS GOLDSTEIN: That’s right. It’s a good question. I think that it’s really important that we keep the pressure on, that we continue to shame the corporate caucus and call for a true end to these subsidies, and not just talk about it.

AMY GOODMAN: Alexis Goldstein, I want to thank you for being with us, communications director at The Other 98%, worked for seven years on Wall Street at Morgan Stanley, Merrill Lynch and Deutsche Bank.

This is Democracy Now!, democracynow.org, The War and Peace Report. The Philippines is still reeling from Typhoon Haiyan, and yet they are paying a fortune in back debt for the former dictator, Ferdinand Marcos. How is this possible? One group is calling for forgiving the debt. Stay with us.

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