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Five Years After Lehman Collapsed: Wall Street Is Strong, We’re Not

Submitted by on September 18, 2013 – 9:27 amNo Comment
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Sunday was the fifth anniversary of the bankruptcy filing of Lehman Brothers, the largest bankruptcy in US history, often cited as the beginning of the Great Recession. And while two bailouts almost undoubtedly prevented an even worse financial collapse, the US has not seen the recovery it expected. Unemployment remains above 5%, and wages stagnate- but the same Wall Street firms that caused the Great Recession are bigger and stronger than ever.

This fact merited a Time magazine cover story, a highly cited article on Slate, a slew of coverage in the New York Times, and articles elsewhere- but it has rapidly been pushed aside due to (admittedly important) coverage of the situation in Syria and the tragic shooting at the Washington Navy Yard.

Many observers, including President Obama, cited new statistics from Berkeley professor Emmanuel Saez, who finds that 95% percent of income gains during the recovery have gone to the top 1% of earners.

Even an attempt to make those numbers more sympathetic to the wealthy isn’t very convincing: the 99% have a “dismal” situation, while the top 1% are just increasing their income at a slower rate than they were in the lead up to the largest financial crash since the Great Depression.

Meanwhile, major financial indicators like the Dow, S&P, and Nasdaq have regained or even exceeded their pre-recession levels. Wall Street executive compensation is nearing record highs.

The financial sector often tries to justify itself as a necessary “engine” for the economy, but the disparity between the performances of Wall Street and Main Street shows this just isn’t true.

Writing about his time at Lehman Brothers in 2007-2008, former employee Nicholas Chirls describes how employees rationalized and justified their actions:

“What I discovered, quite starkly, is that the part of Wall Street that I worked in was simply transferring wealth from the less sophisticated investors, often teachers’ pension funds and factory workers’ retirement accounts, to the more sophisticated investors that call themselves proprietary trading desks and hedge funds…”

“Of course, the traders had all sorts of excuses and jargon to deal with this truth. ‘Oh no,’ they would say, ‘We are important providers of liquidity that create stable financial markets. We’re a crucial part of a system. And besides, if we don’t do it, someone else will.’ These are the lies that people tell themselves so that they can buy larger homes.”

Based on this week’s findings, it seems like this mentality is alive and well. What do you think?

[image by Reuters]

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