For decades, Wall Street has been having things its own way. It demanded bailouts to save its system, paid its elite huge bonuses, and demanded that we pay with cuts, layoffs and foreclosures for the crisis they caused.
The 1% have used their power, their vast financial resources, and their political influence for their own self-interest; they have made themselves very rich. They now own more wealth than the bottom 50 percent collectively.
As the 99% begin to find their own independent voice, the question about what policies we should support to break the power of Wall Street will be discussed more. Socialists argue that we need to take the biggest banks into public ownership and run them democratically by workers and the general public.
Many liberal commentators who correctly argue that Wall Street must be checked point to past governments that deregulated the banking system, leaving them free to pursue all sorts of corrupt practices. Deregulation, they argue, caused the current economic mess and the solution is to pass tougher regulations.
While deregulation may have accelerated and deepened the process that led to the present situation, it was not a fundamental cause. The fundamental causes are deeper, rooted in the very nature of the capitalist system which is a blind, unplanned system based on maximizing short-term profit.
Although socialists support any genuine attempt to check the power of Wall Street, regulating the capitalists will not work in the long run and will not effectively lead the economy out of crisis. This is because capitalism has entered a new historic period of long-term stagnation and crisis, and the system is burdened with enormous debts. The golden age of U.S. capitalism is gone, and U.S. capitalism has less room to maneuver or to make concessions to regulations.
Consider the hysterical reaction of the bankers to the Democrats’ 2010 Restoring American Financial Stability Act, a set of modest regulations on the rapacious practices of the banks. Rolling Stone journalist Matt Taibbi reported at the time that Wall Street deployed an army of 2,000 lobbyists to guarantee that the bill was completely toothless. Stephen Schwarzman, the chairman of the Blackstone Group, absurdly compared a proposal to close a tax loophole for banks to Hitler's invasion of Poland!
This shows that the 1% will fiercely resist regulation and seek ways to overturn it, water it down and render it completely ineffectual, just as they have done again and again in the past.
Some liberals argue that the way to end Wall Street's influence in politics is through campaign finance reform. Wall Street dominates politics, in part by throwing billions at both parties. But, more fundamentally, it dominates politics because it controls the important levers of economic power. According to the Federal Reserve's website, the six biggest banks in the U.S. account for almost two-thirds of U.S. GDP.
Bank of America controls $2.26 trillion in wealth, JPMorgan Chase controls $2.4 trillion, Citigroup controls $1.96 trillion, Wells Fargo controls $1.26 trillion, Goldman Sachs controls $937 billion and Morgan Stanley controls $830 billion. This totals $9.65 trillion, accounting for more than 64 percent of U.S. GDP, which is estimated to reach about $15 trillion in 2011 by the U.S. Department of Commerce.
Wall Street's economic power is more of a threat to real democracy than it ability to buy politicians. The 1% have decisive control over the creation of jobs and the distribution of goods. That kind of power can bring down governments and stop social movements that do not have an effective answer to Wall Street's dominance.
That's why socialists argue for building a grassroots movement that aims to take the banks completely out of the hands of the 1% though public ownership. This measure would deliver the most decisive blow, completely eliminating Wall Street's dictatorship over the economy.
In 2008-2009, the U.S. government was forced to nationalize or partially nationalize some of the biggest failing companies, including Fannie Mae, Freddie Mac and GM. But this was only done as a temporary measure in the interest of saving the capitalist system from further crisis. Socialists have a completely different conception of public ownership.
First, socialists argue that banks should not be under the control of corrupt big business politicians, but democratically controlled from the bottom up by workers and ordinary people. Second, public ownership would not be a temporary measure but would be the start of a radical overhaul of the economy.
To begin the process, we demand the books of the banks should be opened to public scrutiny. All punitive actions against ordinary people should be halted. Small investors would be compensated based on proven need, and of course people’s pensions, which are often invested in these institutions, would be protected. The biggest capitalist investors would not.
Crucially, under democratic workers’ control the financial sector would no longer be run on a for-profit basis. The boards of directors would be replaced by governing bodies made up of elected representatives of the workers at these companies, as well as workers in other industries, homeowners and small businesses: all the people whose lives are so drastically affected by the workings of the banks.
On this basis, we could democratically decide how vast financial resources are allocated, allowing us to directly invest billions in job creation, schools, economic development and cleaning up the environment. Public ownership of the 500 biggest corporations that dominate the economy would be the basis of a new, more dynamic economy - a socialist economy - democratically planned in the interests of the 99%, not the profits of the 1%.
Of course, neither the Democrats nor the Republicans, who both loyally supported the 2008 bank bailouts, would be willing to take this necessary measure. Only a massive movement of working people and young people could make it happen. The Occupy Wall Street movement is an important step in this direction.