Robert Reich
Recent Articles
The Challenge of Closing Tax Loopholes for Billionaires.
Robert ReichMay 24, 2010Who could be opposed to closing a tax loophole that allows hedge-fund and private-equity managers to treat their earnings as capital gains – and pay a rate of only 15 percent rather than the 35 percent applied to ordinary income? Answer: Some of the nation’s most prominent and wealthiest private asset managers, such as Paul Allen and Henry Kravis , who, along with hordes of lobbyists, are determined to keep the loophole wide open. The House has already tried three times to close it only to have the Senate cave in because of campaign donations from these and other financiers who benefit from it. But the measure will be brought up again in the next few weeks, and this time the result could be different. Few senators want to be overtly seen as favoring Wall Street. And tax revenues are needed to help pay for extensions of popular tax cuts, such as the college tax credit that reduces college costs for tens of thousands of poor and middle-class families. Closing this particular...
A Short Citizen's Guide to Reforming Wall Street.
Robert ReichApr 21, 2010The real scandal isn’t Wall Street’s unlawful acts (i.e., Securities and Exchange Commission vs. Goldman Sachs) but legal acts that have reaped the Street a bonanza and nearly sunk the rest of us. It’s good we finally have an SEC on which three out of five commissioners are willing to enforce laws already on the books. Hopefully other enforcement agencies (CFTC, FDIC, and the Fed) will follow suit. But we also need to make illegal the recklessness that’s now legal. The Dodd bill now being considered in the Senate is a step in the right direction. Yet despite the hype, it’s a very modest step. It leaves out three of the most important things necessary to prevent a repeat of the Wall Street meltdown. These steps, after the jump. -- Robert Reich...
The Only Way to Prevent Another Bailout of Wall Street is to Cap the Size of Wall Street's Big Banks.
Robert ReichApr 16, 2010The best way for Senate Dems and the White House to respond to the Republican charge that the Dem plan for financial reform doesn’t go far enough to prevent another bailout is to call their bluff — and simultaneously do what’s necessary to avoid another bailout: Cap the size of big banks, as the UK is close to doing for its big banks. The so-called resolution mechanism the Dems are pushing to wind down any big bank that gets into trouble is a step in the right direction. But it won’t work if two or more giant banks are endangered at the same time — which is likely to be the case when the next crisis occurs because every big bank uses whatever profitable financial ploys every other bank uses (as they did in the run-up to the crash of 2008). Furthermore, as I’ve noted before, as long as the big banks are allowed to be huge and become even bigger, their political clout in Washington will remain huge and become even bigger. And as long as they have this...
Break Up the Banks.
Robert ReichApr 06, 2010A fight is brewing in Washington – or, at the least, it ought to be brewing – over whether to put limits on the size of financial entities in order that none becomes “too big to fail” in a future financial crisis. Some background: The big banks that got federal bailouts, as well as their supporters in the administration and on the Hill, repeatedly say much of the cost of the giant taxpayer-funded bailout has already been repaid to the federal government by the banks that were bailed out. Hence, the actual cost of the bailout, they argue, is a small fraction of the $700 billion Congress appropriated. True, but the apologists for the bailout leave out one gargantuan cost — the damage to the economy, which we’re still living with (witness the latest unemployment figures). Leave it to the Brits to calculate this. Andrew Haldane , Bank of England’s Financial Stability Director, figures the financial crisis brought on by irresponsible bankers and...
Don't Wait for Reform
There's already a law on the books that holds Wall Street CEOs and executives to account -- now it needs to be enforced.
Robert ReichMar 27, 2010Former Treasury Secretary Hank Paulson admitted in his recent memoir that Lehman Brothers' balance sheet was bogus before the bank collapsed in 2008. Nonetheless, Lehman paid out $5.2 billion in bonuses in 2006 and $5.7 billion in 2007. Lehman's investors lost a fortune, of course. But Paulson doesn't extend his logic to its natural conclusion. Lehman's practices weren't all that different from those of every other big bank on Wall Street. Lehman was just the first to go under, causing a financial run that led George W. Bush to warn "this sucker could go down" unless the federal government came up with hundreds of billions to bail out the remaining banks. It should be obvious that the bailouts concealed the other banks' bogus balance sheets -- thereby covering their assets and their asses. We now know, for example, that Goldman Sachs along with a few other banks helped Greece hide its public debt and then placed financial bets that Greece would default, using "credit-default swaps" to...
