No Surprise Over Wall Street Profits
After months of dismal news coming out of Wall Street, a few rays of light have shown through in recent days. Last week, Wells Fargo announced a $3 billion profit in the first three months of 2009, and yesterday Goldman Sachs said it made $1.8 billion over the same span.
But at least one prominent economist isn’t impressed. Instead, University of Maryland professor Peter Morici, a familiar face on Capitol Hill, wrote in an e-mail that the profits should come as no surprise in light of the billions in bailout funds raining down from Washington in the past six months.
The Federal Reserve has permitted the banks and financial houses to park vast sums of unmarketable paper on its books—securities made nearly worthless by the misjudgment and avarice of bankers. In return, the Fed has provided these scions of finance with fresh funds, cheaply, that they may lend at healthy rates on credit cards, auto loans and even mortgages.
And that would be OK — indeed, it was the goal of the bailout — except that lenders aren’t lending at healthy rates. Instead, there’s plenty of anecdotal evidence that they’re bumping up fees and rates on responsible borrowers to bolster profits.
While the Fed cuts the banks slack, the bankers are busy turning the screws on their debtors by raising credit card rates and fees, and harassing distressed borrowers with all the zeal of the Roman army sacking Palestine.
By contrast, Morici wrote, Detroit’s automakers weren’t treated nearly so well — a function of their lobbying powers, not their business prowess.
The contrast between how the banks and car companies are treated is the product of political acumen, not financial skills, at Goldman Sachs and other banks. Feeding the campaign machines of both political parties and lavishing speaking fees on future White House economic advisors, these financial wizards have managed to purchase preferred treatment in our Capital.
Think of that as you pay your taxes tomorrow.