—Steven A. Ramirez
While the economy has been a centerpiece issue in the 2012 presidential campaigns, the election rhetoric thus far is silent about controlling concentrated economic power to restore economic growth. If the historic financial meltdown of 2008 has taught us anything, it’s that it takes only a small handful of corporate and financial elites to inflict trillions in costs upon the general economy. Without sound economic regulation, those controlling excess wealth will enrich themselves at the expense of society. And yet, neither candidate forcefully advocates the taming of the megabanks which today control unprecedented resources.
During the recent presidential debates, key issues involving the megabanks weren’t even touched upon by Obama or Romney. Among those not discussed:
- Not a single Wall Street executive at any of the megabanks at the center of the crisis suffered criminal penalties despite numerous securities fraud settlements. Unprecedented frauds at the megabanks met with unprecedented docility from prosecutors.
- The Dodd-Frank Act empowers the government to break-up megabanks posing a “grave threat” to financial stability. Yet these banks still enjoy a massive subsidy in their cost of funds (about $16 billion a year for the top five megabanks) and under-perform financially. Thus, the megabanks by definition threaten financial stability, and the government should require the weakest among them to spin-off operating divisions to their shareholders.
- Given the huge subsidy that megabanks still enjoy in capital markets, why not toughen up Dodd-Frank further to convince capital markets that “too big to fail” is truly over? Toughening Dodd-Frank did not warrant a word of discussion. Yet, according to polls the vast majority of American voters disfavor continued subsidies for megabanks.
The point transcends financial regulation. With all the talk of jobs, neither candidate offered any kind of jobs program. Just restoring the estate tax to Clinton-era levels (only estates over $1 million pay) would free up $50 billion for millions of jobs. Other topics not permitted on the agenda include: reforming the structure of globalization, stiffening corporate governance law, funding the needs of the 25% of American children living in poverty, and so on.
Echoing the thesis of my book, Lawless Capitalism, anything that threatens the current holders of the largest aggregations of wealth in American history is off-limits for any discussion at all. Instead, the debates focused on whether to cut entitlements and which tax cuts to preserve. The candidates spent much time debating whether slashing tax rates a further 20% made sense.
However, solutions are at hand. Americans must view economic despotism with the same suspicion as political despotism. In terms of this election, that means being mindful of money’s influence on electoral politics, and considering which candidate is most heavily funded by the megabanks (opensecrets.org, for example, tracks contributions). At its founding, America threw off political royalty; it’s time now to do the same with economic royalty.
Steven A. Ramirez is Professor of Law at Loyola University of Chicago, where he also directs the Business and Corporate Governance Law Center. His book, Lawless Capitalism: The Subprime Crisis and the Case for an Economic Rule of Law will publish in December 2012.