Just last week, a Federal Reserve official said, “There are definitely downside risks, but the strength of the economy is really pretty important at the moment. The fundamentals for the U.S. economy are very strong.”
If you just look at Wall Street, it certainly looks strong – that’s what happens after $1.5 trillion dollars in tax cuts for corporations and wealthy Americans are funneled into stock buybacks and dividends, juicing stock prices.
Meanwhile, the tax bill’s impact beyond Wall Street – on workers who haven’t seen a real raise in years, on young Americans drowning in student loan debt, on families trying to buy their first home – is an open question at best.
While hours have increased a bit over the past year for workers as a whole, real hourly earnings have not. And for production and nonsupervisory workers, hours are flat and pay has actually dropped slightly, according to @BLS_gov.
Earlier this month, as part of the annual stress tests, the Fed allowed the 7 largest banks to redirect $96B to dividends & buybacks. This money might have been used to pay workers, reduce fees for consumers, protect taxpayers from bailouts, or be deployed to help US businesses.
Three banks – Goldman Sachs, Morgan Stanley and State Street – all had capital below the amount required to pass the stress tests, but the Fed gave them passing grades anyway.
The regulators are loosening rules around big bank capital, dismantling the @CFPB, ignoring the role of the FSOC, undermining the Volcker Rule, and weakening the Community Reinvestment Act.
When banks are making record profits, we should be preparing the financial system for the next crisis, building up capital, investing in workers, and combatting asset bubbles.
And we should be turning our attention to bigger issues that don’t get enough attention, like how the value placed on work has declined in this country, and how our economy increasingly measures success only in quarterly earnings reports.
Much of that is up to Congress to address, but over the last six months, I have only seen the Fed moving in the direction of making it easier for financial institutions to cut corners, and I have only become more worried about our preparedness for the next crisis. -SB
