Are the very wealthy smarter, do they work harder or were they born under a luckier star than the rest of us? The answer is; no, no and no. So why do the top 5% or so of the American population own or control 80%+ of the wealth in this country? For many of the extremely wealthiest people the answer to this question is simple and obvious; they acquired their money by illegal means. In short; they stole it. That’s the why of; why the rich get richer. The how of it is less simple or obvious, but just a bit. A look at the most recent example of both the why and the how of the rich getting richer can illustrate things quite clearly.
The almost complete collapse of the financial services industry was a disaster for 95%+ of this country’s population. Tens of millions of Americans lost their life savings and/or a significant amount of the value of their pensions in the stock market implosion. Millions of American workers became unemployed, millions more became under-employed and yet millions more have given up on getting a job all together. Millions of families lost their homes and tens of millions lost a large percentage of the value of their home. But the wealthiest Americans got richer by the hundreds of billions of dollars. This entire transfer of wealth from the working and middle classes of America to the very highest level of wealth was accomplished through a series of financial scams, tricks and outright fraud.
It began twenty years ago when some people in Washington, with perhaps the best of intentions, decided that the Federal government should push the financial industry to make money available to lower income Americans so that could afford to own a home of their own. The reasonable thinking behind this was that home ownership made a working class community better by providing people with opportunity to embrace the American dream and giving them a real stake in maintaining the well being of the neighborhoods in which they owned homes. It was a sound, proven and progressive idea. Quasi government agencies like Fannie Mea and Freddie Mac were created and funded by Washington to underwrite or guarantee loans made by banks to lower income individuals without the best credit ratings. Most of the early recipients of these guaranteed loans were responsible, hard working folks and made their mortgage payments on time. The plan would have worked very well had not just a few people seen in it the opportunity make themselves rich. And they were in positions that allowed them to take advantage of the situation.
These few people allowed the guaranteeing agencies to underwrite loans to people whose prospects of paying back the borrowed money was somewhat less than acceptable under normal banking criteria. But given the directive and guarantee by these agencies, the banks were happy to relax, and then all but abandon, any reasonable standards of credit reliability; because they had nothing to lose ‘” the government sanctioned agencies were buying up all the bad loans. The banks for their part upped the stakes by creating short term low or no interest teaser loan rates to lure in those who in reality couldn’t at all afford the mortgage on a bigger better house and convinced them that they could flip the house before the jump-up increased rate part of the mortgage came into effect. However due to the unrealistic cheap loans the housing market overbuilt, the markets saturated and housing sales stalled. This created an almost total inability to flip the houses and the whole scam fell like the house of cards it in reality was. But the people at the top of Fannie and Freddie walked away with up to one hundred million dollars in salary and bonuses. They got very rich by abusing their position of authority and using obviously bad banking policy which created the root cause of the financial industry collapse that followed. They took money they didn’t earn or deserve; they stole the money
As millions of these bad loans went into default and the banks couldn’t readily unload them to the quasi government agencies anymore; they developed a scheme to pass this bad debt along to other people. The Wall Street banks who were recently allowed by the U.S. Congress to also act as brokerage agencies, bunched these loans that they knew were bad together and then sliced and diced them into bundles they then sold to their customers. The Wall Street Gangs, with the cooperation of rating agencies which were paid a fee for their aiding and abetting, told their customers that these were solid investments, while they themselves were unloading these loans. To make matters worse they went so far as to buy insurance against the prospect of these loans being paid off (because they knew the loans were bad) and in doing so put the largest of insurance companies in a position of bankruptcy. For creating, then exacerbating the sure to fail financial situation, in which hundreds of millions of people lost lots of money, the Wall Street Gangsters paid themselves billions of dollars in salaries and bonuses. They took money they didn’t earn or deserve; they stole the money.
Neither the government sanctioned entities nor the Wall Street bank could have accomplished the criminal theft they did had the government of the U.S., who has oversight responsibility over the financial industry, been doing their job. The Congressional committees, the Treasury Department, the Securities and Exchange Commission, along with other Federal watchdog agencies turned a collective blind eye on all the criminal activity going on. In exchange for their non-interference in the biggest financial scam ever, many members of Congress received huge contributions from financial corporations. Other players within the government got big money jobs with the firms which benefited greatly from the willful neglect and dereliction of duty of these government officials. They took money they didn’t earn or deserve; they stole the money.
In the old days the Robber Barons took advantage of their positions of monopolistic holdings to force higher prices to be paid for their goods and services. They used their power to leverage the wealth they created into a much large bundle of money; but least they created some wealth. They built railroads, they refined oil and sold gasoline, they made Model T cars. They took raw materials and in partnership with labor and created products that were really useful.
Today’s Robbers create virtually nothing in terms of real wealth; they merely shuffle papers and try to leverage everything, whether it has real value or not. All they create are financial “instruments” with little intrinsic value; the profitability of which is based on finding someone with cash to invest and convincing them to turn it over to them, so they can then separate the trusting fools from their money. When the Wall Street Gangsters of the 1920’s over leveraged positions in the markets and caused the crash and ensuing Great Depression; the Federal government passed laws and regulations to prevent that sort of predatory behavior by Big Wall Street from reoccurring. However in exchange for the huge amounts of money contributed to the coffers of members of the U.S. Congress, members of that branch of government, who are supposed to represent the entire constituency of a district or state; passed legislation that allowed end of the long held separation of commercial from investments banks and then became deaf, dumb and blind when it came to hearing, seeing or speaking out to stop the bad mortgages, the inherently bogus credit default swaps and the insurance scams that compounded the whole thing. Some of the blame must also go to the Executive branch administrations of both parties that also heard, saw and spoke of no evil while the walls came tumbling down.
Now two years later, not a single perpetrator has been apprehended, tried or gone to jail. The huge salaries and bonuses for the thieves in the financial industry continue and even increase. Vast sums of public money has been used in entirely unaccountable ways to allow firms that were literally insolvent to continue to make huge profits without so much as an I’m sorry or a Thank you. The undeserving and ungrateful members of the super rich still fight tooth and nail to not pay a penny more in taxes to provide the funding for the necessary functions of government they too benefit from. The number of poor in America is steadily growing, the middle class is shrinking and there appears to be no end in sight to this downward trend. Now is the time to stop the illegal transfer of wealth from the hard working citizens of America to the very wealthy who take it from us and everyone else they can, worldwide. We have all the laws we need to stop the kind of grand theft we suffered from and to prevent it from happening ever again. We just need to make our government do it, by throwing the bought and paid for out and electing honest fellow citizens.
During what will probably now be called the First Great Depression, the New Deal provided employment and stimulus to the economy through a vast array of public works projects. With America’s infrastructure crumbling all around us; a 21st Century New Deal would certainly be one way the government could help change the direction of this country’s economic trend line. If all the workers were American citizens, all the materials were American made and all the contracts were fairly awarded; we could not only start to repair what we have neglected for too long, but also learn that the skill, knowhow and high quality human resources of the American people are still ready willing and able to do the kind of work that made this country the model for the entire developed and developing world. We must find political leaders with the foresight, integrity and courage to face down the predatory economic bullyboys trying to control this country and tell them, their unlawful economic days are over. And to say in a loud clear voice; the only way to get rich or richer in America, from now on, is honestly.