In an opinion piece titled “Why Labor Backs ‘Occupy Wall Street’” published in last weekend’s Wall Street Journal, Mary Kay Henry, president of the Service Employees International Union criticizes the media for “obsess[ing] over what the Occupy Wall Street protester’s want”. What is more important “than any set of demands”, she says, is “to understand…the values that unite the protesters and their authentic understanding of what has gone wrong in our economy.”
Unfortunately, Ms. Henry could not have the situation more backwards. The problem with the Occupy Wall Street protesters is that they have virtually no idea what has gone wrong with our economy, and thus, have very little in the way of concrete ideas about how to fix it. One sign seen among the crowd of angry protesters read: “Abolish Capitalism”. If this is representative of the group’s ideas about how to turn our economy around, they can hardly be taken seriously.
These protesters remind me very much of those who insisted that no bailouts were necessary in early October, 2008. What those folks did not realize was that the entire system of borrowing and lending that underpinned global commerce was coming undone. Most of the folks who protested TARP could not tell you what LIBOR was.
The very same thing is happening today in downtown Manhattan. Mary Kay Henry writes that “when Wall Street was on its knees, the American taxpayers came to their rescue with trillions of dollars in bailouts” but now “the banks refuse to invest in the small businesses that drive job creation.” The irony here is captured in an article entitled “Tale of Two Loan Programs” published in the October, 6 edition of the Journal.
The Small Business Lending Fund set up by the Treasury Department dispersed $4 billion in federal funds to 332 community banks for the express purpose of stimulating lending to small businesses. As it turns out, 137 of those banks used $2.2 billion of the money to pay-off outstanding TARP loans. According to the Journal article “lenders said it was important to be rid of TARP, which has developed a stigma as public sentiment soured on the notion of financial-market bailouts.” So, in order to stave-off negative public opinion regarding outstanding TARP loans, banks have been forced to use funds allocated for job creation to pay back the Treasury (and, by extension, taxpayers), creating more ill-will from the public because those funds were not used for small business loans. A vicious cycle isn’t it?