Occupy Wall Street or Occupy Wrong Street?

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.

http://cdnapi.kaltura.com/index.php/kwidget/wid/0_i07lcl3j/uiconf_id/6501231

Andrew D’Amato

Altucher, James. “Dear Occupy Wall Street: Are You Sure You’re in the Right Place?”Freakonomics » Dear Occupy Wall Street: Are You Sure You’re 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/&gt;.

http://abcnews.go.com/WNT/video/gas-prices-wall-street-fault-15779498

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4 responses to “Occupy Wall Street or Occupy Wrong Street?

  1. I enjoyed reading your examination of government and bank practices which led up to the 2008 recession, especially your discussion of Fannie Mae and Freddie Mac. However, I would be careful about making a claim such as you made in your last sentence, stating that none of the events were caused by OWS. Such a statement should be qualified rather than presented as fact. Also, it is a common contention among OWS protestors that these government policies were enacted to please the 1%, who are the real power behind the U.S. political system. There is a cartoon set as the cover photo of the “Occupy Events” Facebook page which points to this perception. Perhaps your next post should address that question, or at least mention it. Is there any possibility these protestors are right about the 1%’s supposed influence over the government?

  2. coffeeshoprhino

    Andrew, Is this a summary Prof. Altucher views? If so can you add some other perspectives?

  3. I just added a video talking about Wall Street’s influence over gas prices. Also, I think you could present my concluding statement as a fact based on the examples used in my post. All of the decisions that created the system in which traders on Wall Street work in were not decided on Wall Street. A big part of what I was trying to portray through this post is that Wall Street functions under the policies of the government and that I think a very reasonable case can be made that more fault should be put on other entities besides Wall Street. The Federal Reserve, Financial Accounting Standards Board, hedge funds, big banks and the financial irresponsibility of American citizens played a monumental role in creating the national issues that contributed to the development of the Occupy Wall Street Movement.

    However, it is very true that Wall Street holds significant power over the economy, and thus, a certain amount of influence with government. The video I added about gas prices is a prime example of the perceived corporate greed and corruption on Wall Street that the OWS Movement is fighting.

  4. Pingback: What is “Occupy Wall Street”? | Occupy Wall Street Analysis

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