Statistics are boring, but it's important to wrap your head around this latest one from the Federal Reserve as the definitive epitaph for the American dream. Wall Street's financial shenanigans, the banking games that made some fat cats outrageously wealthy as they turned home mortgages into toxic securities, wiped out 20 years of growth in American families' net worth.
"Americans saw wealth plummet 40% from 2007 to 2010, Federal Reserve says," is how The Washington Post headlined the startling news that all of the economic gain of the past two decades had been destroyed by the banking meltdown. And with housing values -- the bulk of middle-class savings -- indefinitely moribund, the situation will not get better anytime soon.
"The recession caused the greatest upheaval among the middle class," the Post noted. "... Their median net worth ... suffered the biggest drops. By contrast, the wealthiest families' median net worth rose slightly."
That outcome, disastrous to the American ideal of a nation of mostly middle-class stakeholders competing on a relatively equal economic playing field, was pre-ordained. When tens of millions lost their jobs and homes as a result of financial swindles that the Federal Reserve failed to prevent, this ostensibly public agency, with strong bipartisan support in the White House and Congress, adroitly directed the flow of public funds to save the bankers while abandoning their victims.
On Tuesday Sen. Bernie Sanders, acting under authority of the Dodd-Frank financial regulations, released the conclusions of a Government Accountability Office report showing that "[d]uring the financial crisis, at least 18 former and current directors from Federal Reserve Banks worked in banks and corporations that collectively received over $4 trillion in low-interest loans from the Federal Reserve."
One of those Fed directors, Jamie Dimon, chairman and CEO of JPMorgan Chase, who has been on the New York Fed board since 2007, testified before Congress on Wednesday that he was sorry his company lost billions in risky trading even after all of the warnings concerning too-big-to-fail banks.Dimon -- whose company last year paid him $24 million, compared to the $45,800 median U.S. family income -- testified that the bank could manage its own affairs. But that is hardly reassuring given that the Fed provided JPMorgan Chase $391 billion in total assistance as well as paying the bank to administer the government's emergency lending program. It was the Fed that back in March of 2008 made $29 billion available to Dimon's bank so it could acquire beleaguered Bear Stearns; the Fed also agreed to purchase Bear Stearns' most toxic assets before the merger.
