The Occupy Wall Street movement, if we can call it that, has gone global. All around the world people are protesting what they believe is corporate and government greed that resulted in the failure of economies across the globe. Many are holding signs that say things like; “Capitalism doesn’t work. Try Socialism.” Really?
What bothers me most about this “movement,” and there is a lot about it that bothers me, is that these people are completely clueless. More to the point, the overwhelming majority of them are college students, who obviously don’t have to work because they are out on the streets in the middle of the day while the rest of us are working. This includes their parents, who are no doubt paying for their tuition, rent, books and other expenses. Unfortunately for those parents, instead of being grateful for their incredible good fortune, they are out skipping classes and getting arrested.
The recent protests here in Santa Barbara underscore how ignorant these people are. One of the locations the protesters visited was the Wells Fargo branch at 1036 Anacapa St., where they chanted “Banks got bailed out; people got sold out.” Catchy.
The problem is that most of the large banks — the ones they are standing in front of to protest — tried to refuse the TARP (Troubled Asset Relief Program) money, but were forced to take it by the then-Treasury Secretary Henry Paulson.
More important, the vast majority of these large banks, including Wells Fargo, have repaid every penny they took, with interest. In fact, according to the Treasury Department, overall, the Treasury has received $313 billion in repayments and other income from its TARP investments, which is more than 76 percent of the $412 billion disbursed under the program to date. Even AIG, which took TARP money totaling approximately $180 billion, has repaid all but about $50 billion so far. Misguided.
Ironically, it was the government’s failure to bail out Lehman Brothers that resulted in the single-most dramatic hit the economy and financial markets took, when Lehman, on Sept. 15, 2008, filed for bankruptcy. The previous weekend, the Korean Development Bank was in negotiations with Lehman to buy the investment bank. The Korean bank asked the U.S. government to basically back-stop its potential losses, because the bank could not get an accurate read on the derivatives positions that Lehman had on its books. When Paulson refused, the deal fell apart.
Lehman then announced it was filing for bankruptcy, the largest in U.S. history, and the financial market imploded, costing investors more than $2 trillion. The resulting contraction of the U.S. economy, as well as the spillover to economies across the planet, cost many trillions of dollars more in lost economic activity, which in turn resulted in much higher global unemployment. These losses dwarfed what it would have cost to support the Lehman takeover by the Korean Development Bank, or to simply bail out Lehman directly. If protesters want to complain, they should be complaining that the government didn’t bail out Lehman. Misguided.
I was not in favor of a Lehman bailout to save Lehman Brothers, or even to save the thousands of jobs that were lost when it failed. I believe strongly that if we had provided that backstop, we still would have had a recession and a stock market decline, but we would not have seen the widespread panic that resulted from the Lehman bankruptcy, and therefore I do not believe the recession or stock market hit would have been so severe. Less money and fewer jobs would have been lost.
Another important aspect to this story is the role the major banks have played to absorb other companies that would otherwise have declared bankruptcy, further pressuring the financial markets and causing many more job losses (maybe even including some of those parents mentioned above). Companies like Merrill Lynch and Countrywide, just to name two. The government asked (forced) many of the large banks to take over other companies, sometimes at valuations that were much higher than what the bank could have purchased the same company for, out of bankruptcy.
I am not against lawful protesting. Freedom of speech and the right to assemble are rights afforded every American in the Constitution. What I am against is a bunch of ignorant college students who are free to roam the streets because mommy and daddy are paying their bills disrupting the economy further, protesting about issues they don’t understand. These fools have already cost the city of New York more than $2 million just in police overtime costs alone.
At the end of the day, what will they accomplish? Nothing, other than making the lives of those who do have jobs harder, and costing millions of dollars that must be covered by taxpayers — again, those who actually have jobs.