up the same tired old recipe. He promises to “unleash” corporations to create more jobs by, among other things, reducing regulations. True to his word, he picked an Environmental Protection Agency director who fights against rules that protect our air and water, and a Secretary of Labor opposed to rules that protect our workforce.
Oh yes, it is very clear from Donald Trump’s cabinet that he thinks the virtues of deregulation know no limits. Indeed, Trump delivered this across-the-board approach to making America great again: “We’re getting rid of regulations which goes hand in hand with the lowering of the taxes.”
Let the big corporations do whatever they want. What could possibly go wrong?
The enthusiastic corporate sponsorship of conservative economics should have been the tip-off. The embrace of trickle-down economics was nothing more than a brazen ploy to ensure that this country would be run so that the rich and powerful can get richer and more powerful.
The concept of trickle-down economics was bad enough. But it also had an evil twin: the idea that government was the enemy. After Roosevelt harnessed the federal government to work for millions of Americans, powerful corporations pushed back with the idea that government—not corporations—was the enemy. Many helping hands heaped ridicule on government, and America’s poor corporations were cast as its victims.
As with any movement, the idea couldn’t have taken hold if there hadn’t been some truth to back it up. Let’s face it: some of the government’s rules are stupid, and some rules are stupidly enforced. Anyone who has ever tried to erect a new building or open a new business and along the way run into a series of codes and inspections and petty bureaucrats may be ready to sign on with a politician who promises “smaller government.”
But chanting “deregulation” at the federal level didn’t actually fix many problems for small businesses. Mostly, it created huge giveaways that only giant companies could take advantage of. Repealing Glass-Steagall in 1999 helped a handful of gigantic banks get even more gigantic, but it didn’t do much for the community banks trying to compete with them. The same can be said about the decision not to regulate risky new financial instruments. Government’s hands-off approach to this new danger fattened profits for giant banks while it bankrupted families. Regulatory rollback and tax breaks for large corporations help large corporations, but they don’t help anyone else.
For decades now, Republicans have been feeding small businesses the same lines about how the GOP is the party of small government. But after promising the moon, they sure haven’t delivered much. Maybe that’s because most of the benefit they deliver is scooped up by the big guys.
Despite pretty promises, Republicans have delivered a rigged system that lets giant companies and multimillionaires treat the American economy like a candy store that’s open only for them. What does the couple running a great little restaurant in Somerville, Massachusetts, get from federal rollbacks? Nothing—which is about what most families and small businesses get.
WHEN THE COPS WORK FOR THE CROOKS
Trickle-down ideology started with raw power: the powerful devised ways to exercise even more power. With fewer regulators to say no, big corporations began venturing into territory that had long been closed to them. Wall Street firms showed the way. For years they had chafed under the restrictions put in place in the 1930s, and they had fought back from the beginning. But now, one battle at a time, they began to win. Big banks were turned loose to load up on risks. Those risks boosted both revenues and profitability, and—no surprise—the executives cashed their paychecks, pocketed their bonuses, and didn’t ask too many questions.
The jump in profitability was like a cocaine high—it felt amazing while it lasted, but it was potentially deadly. Risks always come back to bite someone. The CEOs knew that, but they expected they could grab their money and get out, and the drug would keep working. And if it all came crashing down, everyone else, including investors, customers, and taxpayers, would be left holding the bag.
A banking scandal that erupted in the late 1980s should have sounded a warning. The country’s savings and loans associations, once sleepy little consumer banks that specialized in mortgage lending, were largely deregulated in 1982. They immediately started growing, offering bigger and bigger loans and many more new products. In just three years, the S&Ls jumped 50 percent in size, and speculators began buying them up as if each one was a goose that could lay golden eggs. But no bubble lasts forever, and soon many of the high-flying, poorly regulated S&Ls became insolvent. When the bubble popped, more than a thousand of the nation’s 3,200 S&Ls were shut down. And, in a show of real accountability, government regulators criminally prosecuted more than a thousand bank executives.
Because the S&Ls were relatively small and because the problems rolled from region to region over time, they didn’t crash the entire economy. But to keep the system functioning and keep depositors from losing any money, U.S. taxpayers laid out about $132 billion. Yes, $132 billion. Stop for a minute and think about that pile of money: in 1995, when the last S&L was shuttered, the federal government had funneled more to these financial institutions than it had spent on education, job training, veterans’ benefits, social services, and transportation combined.
At this point, alarms should have been sounding everywhere—shrieking sirens and clanging bells. The pattern was unmistakable: (1) bank deregulates; (2) bank loads up on risk; (3) crisis occurs; (4) bailout follows.
The S&L scandal should have screamed at regulators and Congress to pay attention and tighten up bank regulations. If they had, the next round of problems with banks crashing the economy would have been stopped before it started. But the politicians didn’t want to hear it. (I guess it’s hard to hear when your ears are stuffed with money.) The banks—particularly the giant banks—kept pushing for less and less oversight, and the politicians followed right along.
Instead of sobering up in the aftermath of the crisis, the big banks charged ahead. Their target: Glass-Steagall. Licking their chops over the chance to combine boring banking (and all the money in those checking and savings accounts) with high-risk financial speculation, the banks lobbied to pull down one of the pillars of our financial system. And they didn’t worry about the fallout. They figured that if anything went wrong, the government would step in and make sure that all those little depositors were protected—and in the process, the government would protect the big banks as well. Throughout the 1980s and into the 1990s, high-paid lobbyists aggressively attacked a wide array of financial regulations. Over time, they targeted one brick after another in the wall that separated banks from Wall Street trading, and, over time, the bank regulators caved in again and again. In 1999, the few remaining provisions of Glass-Steagall were repealed.
The results were immediate. Big banks grew into giant banks, and giant banks grew into monsters. In 1980, the ten biggest banks in America controlled less than one-third of the market; by 2000, they had captured more than half the market, and by 2005, their share had risen to almost 60 percent. By 2008, just five uber-banks controlled 40 percent of the market. Through it all, bank CEOs displayed a boldness that would have put a medieval royal prince to shame.
Take a look at just one example. In 1998, when Citicorp decided that it wanted to merge with a giant insurance company, the two corporations faced a teeny-tiny problem: the merger would be illegal. Such a bank-nonbank merger would violate the existing provisions of Glass-Steagall and other banking laws that had been in place since the 1930s. But why should these princes of finance let mere federal