The Financial Class and the Middle Class
In recent weeks I’ve begun pretty seriously rethinking my positions on organized labor and especially public sector unions (more on this in some upcoming posts) and I think there is a compelling case to be made that a really vibrant, stable middle class requires some sort of resurgence of the labor movement. But I have a question: how does organized labor work as a counter to the financial industry? It was one thing to have unions stand up against corporate industrialists, it’s quite another when the real robber barons of our time are all hedge fund managers and multi-national banking CEO’s. But something has to be done to counter the power of these institutions and the danger they pose to the American economy. Do we return the banking sector to its past (and perhaps proper) role as a less aggressive, less risky business? Noah Millman points out that:
Fifty years ago, banking was a sleepy profession, with easy hours, comfortable but not extraordinary salaries, and a professional culture that was anything but entrepreneurial. Now, it’s an extremely aggressive culture, but all of that aggressive, competitive energy goes into figuring out better ways to rig the same game. A lot of people think the solution is to go back to what banking was fifty years ago. I’m not sure that’s possible, and I’m pretty sure if entrepreneurship is as important to the economy as Jim thinks it is that it’s not optimal. Rather, we need bankers with more of an entrepreneur’s appreciation of uncertainty.
Of course we can’t just snap our fingers and voila! presto! imbue bankers with either a sense of uncertainty or honesty. We’ve given too loose a rein to the wild speculators at the top of the economic ladder, and rewarded them with unsustainable riches for their unsustainable risks. Perhaps the fact that there is no possible way for organized labor to act as a counter to the banking industry should set off some warning bells. What kind of industry moves so much money through so few fingers? We keep buying the idea that all this innovation and growth is only possible with a really aggressive banking industry. I’m not at all sure this is true. For one thing, there’s no reason investment banks and traditional banks should be operated under the same roof. For another, there was still a stock market and trading and growth long before we undid Glass-Steagall. The last time we had a largely unregulated banking sector we fell into the Great Depression. This time it’s the Great Recession. If curbing some of this “growth” coming out of the financial sector leads to a Great Stagnation, well that strikes me as a better fate than either of the other two. Smaller,
more less leveraged banks [had reworked this sentence and mangled it in the process sorry], and separate traditional and investment banks is likely the best option we have to prevent another financial meltdown and return banking to its sleepier, less risky former self.