From the imposing brass doors of Goldman Sachs (GS, news, msgs) in New York to a bankers convention in Chicago to a Bank of America (BAC, news, msgs) lobby in Iowa, ticked-off Americans are gathering to let bankers feel their rage.
Their anger is as understandable as it is palpable. Americans rightly blamed the banks for the financial crisis. Now they're peeved that bankers rescued by massive taxpayer bailouts are rewarding themselves with huge bonuses as they skimp on the lending that would create jobs and help the economy.
This populist outrage has put financial reform back on Washington's agenda. But here's the hitch: For all the talk, the experts say, nothing proposed thus far would prevent the risky behavior that led to the meltdown.
Here's a look at what's been proposed and the changes we should really be demanding.
Nothing trickled down
You'll remember that the bailouts were supposed to save not just banks but the economy -- and be accompanied by reform to prevent future meltdowns."There was a theory that if you bailed out the banks, they would lend money to small businesses, and they are not," says Stephen Lerner of the Service Employees International Union. "Banks have unlimited money to reward themselves, but they have no interest in lifting up the country that helped them."
It's those rewards that have spurred a second round of outrage. The top six banks -- Bank of America, Goldman Sachs, JPMorgan Chase (JPM, news, msgs), Wells Fargo (WFC, news, msgs), Citigroup (C, news, msgs) and Morgan Stanley (MS, news, msgs) -- are on track to pay out $140.5 billion in bonuses for 2009, the SEIU calculates.
"People are angry about it, and they have a right to be angry," says Heather Booth, the executive director of Americans for Financial Reform. "Banks got funding, and we lost our jobs and homes, and our pensions and college savings have been jeopardized. At a time when everyone else is feeling the squeeze, you see the bank executives making off like bandits."
The bankers -- and some pundits -- have met the outrage with warnings about the proverbial pitchfork-wielding mobs. Citigroup's market strategist, Tobias Levkovich, recently warned that "objectionable" populism might "open up a treacherous path if mob mood swings essentially take precedence to reasoned deliberation."
Reviving the issue
Perhaps it could, and I, of course, support no violence. But no one has been tarred and feathered yet, while more than a year of reasoned deliberation has yielded nothing in the way of reform.In fact, until recently, reform seemed to have dropped off the radar screen. Then bailouts and bonuses became issues in the huge upset victory by Republican Scott Brown in Massachusetts' special Senate election.
Suddenly, everyone in Washington wanted to be a populist. President Barack Obama unveiled a batch of reforms at a news conference that included macho posturing about wanting "to get into a big fight with the banks." Republicans talked just as tough, though nothing proposed has much GOP support.
This uproar has made it more likely that something will come out of Washington before the November elections. But the experts see a huge gap between what's in the works and what's really needed.
"Beyond a doubt, the reforms on the table would do nothing to fix the problems," concludes Simon Johnson, a Massachusetts Institute of Technology professor and a former International Monetary Fund chief economist. "Their hearts are not really in substantial change."
I hear the same thing from just about every banking expert I talk with.
Let's look at the Obama proposals first.