Although the Occupy Wall Street Movement has no truly defined national purpose, it is generally known to be a protest of corporate greed and corruption in the United States. However, is Wall Street really to blame for the 99%’s discontent?
James Altucher, a writer for http://www.freakonomics.com, would argue that the protestors are on the wrong street. The economic classist controversy demonstrated through this movement has been caused by a build up of legal and political decisions that were not necessarily made on Wall Street.
Government policies that have attributed to today’s economic divides trace back to the Clinton Administration of the late 90’s. Andrew Cuomo, former Secretary of Housing and Urban Development under Clinton, made it easier for Fannie Mae to secure housing loans for citizens. At the time, this allowed more people to escape urban poverty through securing government loans. Two presidencies later, Fannie Mae’s “easy to get housing loans” led to a serious housing crisis of unstable financial backing.
Along with Fannie Mae, the Federal Reserve had their hand in crippling the United States economy through lowering interest rates. In the early 2000’s, there was a high demand for better returns on investments, primarily bonds and pensions. This led to banks “fixing” the problem through turning the recent subprime mortgage deals into mortgage backed securities. This allowed middle and lower class citizens to circumvent the Federal Reserve’s low interest rates and make more desired returns on investments.
It seems like the banks are to blame for this…sort of. Customers of the banks asked for the less stable mortgage backed securities and the banks simply delivered to meet demand. So its the average citizen’s fault, right? One could probably make that argument until we reach the topic of hedge funds and questionable accounting principles. Since mortgage backed securities were yielding higher interest again, hedge funds began to start acquiring them quickly and in excess. Investment banks (that are now under new leadership) followed the hedge funds and starting buying these securities as well. Why not? It was the most profitable move at the time.
Well, at least it was the most profitable move. To complicate things a bit more around this time, the Financial Accounting Standards Board changed accounting policies so that mortgage backed securities could no longer be marked in a statistical analysis and that defaults on loans had be recorded immediately. Basically, a hedge fund or broker began trading these illiquid mortgage based security assets as soon as the costumer fell behind on payments. Banks were then paying out liquid assets for money that was not paid by the person who took out the loan. In essence between 2005 and 2008, banks got called on a lot of bets their asses couldn’t cover all at once. One huge housing bubble explosion later along with major stock market plummets, $900 in government bank bailouts, removal of multiple Fortune 500 bank CEO’s and a big jump in foreclosure rates across the country, the Financial Accounting Standards Board changed the rule back. Oops?
It certainly is interesting to attempt to follow the path that has led to the inequalities between the 99% and the 1%. However, one thing is certain, very few of those detrimental decisions actually occurred on Wall Street.
However, Wall Street traders could take some blame for other struggles faced by the American economy. One example reported by ABC News addresses Wall Street’s influence over gas prices in the United States claiming that approximately $15 out of every tank of gas is going straight into traders pockets.
Altucher, James. “Dear Occupy Wall Street: Are You Sure Youâre in the Right Place?”Freakonomics Â» Dear Occupy Wall Street: Are You Sure Youâre in the Right Place? Web. 10 Apr. 2012. <http://www.freakonomics.com/2011/09/30/dear-occupy-wall-street-are-you-sure-youre-in-the-right-place/>.