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The US Leads the World in Millionaires, but the Wealth Is Not Trickling Down
The spectacular wealth of America’s wealthy is paying no great dividends for average Americans; those dividends are funneling instead to the top of the U.S. economic ladder.
Aug 21, 2023
Five-star hotels. So yesterday. Today’s super rich, The Wall Street Journal reports, are picking palatial luxury villas over swanky suites when they need a quick pick-me-up.
Italy, France, and Greece currently offer the widest array of villa options, but Portugal seems to be catching up fast. So many options!
How can our deepest pockets find the right one? A “high-end travel consultant,” the Robb Report on luxury living points out, can identify just the perfect villa vacation. The cost for joining the circle that can access one top consultant’s advice: $25,000 in annual fees on top of a $150,000 joining fee.
The world’s distribution of wealth remains remarkably top-heavy. Individuals with less than $10,000 to their name—52.5% of the world’s adult population—hold just 1.2% of the world’s assets.
The cost of actually renting a high-end villa? The realtor agency Oliver’s Travels was offering at one point this summer three dozen villas renting for over $130,000 a week.
How many people on our Earth today can afford to put down—without batting an eye—that sort of cash? Some of our best annual stats on our global super rich have been coming out, over recent years, from the Swiss banking giant Credit Suisse. But this fabled 167-year-old institution stumbled royally during the pandemic and, earlier this year, ended up the property of its Swiss rival UBS.
UBS, fortunately, has opted to continue Credit Suisse’s annual Global Wealth Report tradition, and the 2023 edition—covering data through 2022—has just appeared. As usual, this annual report’s release has enjoyed substantial media coverage worldwide, especially in the business press.
Most all the latest coverage has generally emphasized the news in the 2023 report’s opening lines. As one typical headline, from Bloomberg, reads: “Global Wealth Fell Last Year for First Time Since 2008.”
Wealth per global adult, the new Global Wealth Report does indeed show, fell by 3.6% in 2022. But most of that decline, the report goes on to add, “came from the appreciation of the U.S. dollar against many other currencies.” Hold those exchange rates constant and the story changes. Wealth per adult increases by 2.2%.
This year’s Global Wealth Report actually has a much more important story to tell than the global wealth per adult, and the global media coverage has by and large missed it. That story: The world’s distribution of wealth remains remarkably top-heavy. Individuals with less than $10,000 to their name—52.5% of the world’s adult population—hold just 1.2% of the world’s assets.
Those numbers almost exactly reverse at the other end of the Credit Suisse Research Institute’s “global wealth pyramid.” The 1.1% of the global adult population worth over $1 million individually holds 45.8% of the world’s wealth.
One nation—the United States—is driving this incredibly top-heavy statistical picture. Some 38% of the world’s millionaires call the USA home. China, the next largest contributor to the global millionaire population, claims just 11%. Japan and France, the next two highest millionaire manufacturers, each claim only 5% of our globe’s at least seven-digit set.
Worldwide, about a quarter-million individuals—243,060, to be exact—qualify for Credit Suisse’s more exclusive “ultra-high-net-worth” status. These ultras each hold at least $50 million in personal wealth, and over half of them, 51%, hail from the United States. That U.S. ultra-rich share nearly quadruples China’s ultra-rich population, the world’s second largest.
America’s richest of the rich, in short, dominate the ranks of our global deep-pockets. But the rest of us Americans, cheerleaders for our rich love to assure us, have no cause for unease about that domination. The more wealth that America’s wealthy accumulate, their reasoning goes, the more our rich can invest in creating better futures for ordinary working Americans.
The latest Credit Suisse numbers totally undercut that claim. In other developed nations—societies with the rich holding significantly smaller shares of their national wealth than in the United States—typical people have seen substantially greater growth rates in their personal wealth.
Back in the year 2000, the typical American had a net worth of $46,479. The typical net worth of French adults that year: $51,360. By the end of 2022, the typical French adult held $145,591 in personal wealth. The typical—median—U.S. adult wealth last year: just $107.739. Over that same two-decade-plus span, the typical Dutch median net worth jumped from $44,513 to $120,270, the typical Canadian from $37,295 to $143,862.
The spectacular wealth of America’s wealthy, in other words, is paying no great dividends for average Americans. Those dividends are funneling instead to the top of the U.S. economic ladder.
Just one final illustrative example of that dynamic from the new 2023 Global Wealth Report: Japan’s top 1 percenters hold 18.8% of their nation’s wealth. The U.S. top 1% wealth share? Almost twice as much: 34.2%.
Japan’s most typical adults, meanwhile, hold personal net worths of $124,258, some 15% higher than the $107,739 U.S. wealth median.
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Credit Suisse Complicit in 'Massive' Conspiracy to Help Rich Americans Dodge Taxes: Senate Report
"Republican budget cuts have decimated the IRS's ability to root out this kind of offshore tax evasion scheme," said Sen. Ron Wyden.
Mar 29, 2023
The Senate Finance Committee on Thursday published the results of a two-year investigation showing that the scandal-plagued Swiss bank Credit Suisse has been complicit in a "massive, ongoing conspiracy" to help wealthy U.S. citizens dodge taxes.
Spearheaded by Sen. Ron Wyden (D-Ore.), the chair of the Senate panel, the probe found that Credit Suisse violated the terms of a 2014 plea agreement with the U.S. Department of Justice (DOJ) that required the bank to crack down on tax dodging by its U.S. clients.
As part of the 2014 deal, according to the Justice Department, Credit Suisse admitted to "knowingly and willfully" helping U.S. clients hide offshore assets and income from the Internal Revenue Service (IRS).
The Senate Finance Committee report states that it obtained "voluminous records detailing the role Credit Suisse employees played in assisting U.S. businessman Dan Horsky in concealing over $220 million in offshore accounts from the IRS."
"The committee's investigation also uncovered almost two dozen additional large, potentially undeclared accounts held by Credit Suisse belonging to ultra-high net worth U.S. persons," the report continued. "In 2022, Credit Suisse disclosed to the committee that in connection with its ongoing cooperation with DOJ, it had identified 10 additional large client relationships involving U.S. persons, with each client holding accounts in excess of $20 million."
Wyden said in a statement Wednesday that "at the center of this investigation are greedy Swiss bankers and catnapping government regulators, and the result appears to be a massive, ongoing conspiracy to help ultrawealthy U.S. citizens to evade taxes and rip off their fellow Americans."
"Credit Suisse got a discount on the penalty it faced in 2014 for enabling tax evasion because bank executives swore up and down they'd get out of the business of defrauding the United States," the Oregon senator continued. "This investigation shows Credit Suisse did not make good on that promise."
"Republican budget cuts have decimated the IRS's ability to root out this kind of offshore tax evasion scheme, but Democrats are committed to stepping up enforcement against wealthy tax cheats."
The report was published days after the Switzerland-based investment banking giant UBS agreed to purchase Credit Suisse for more than $3 billion as the latter firm faced growing questions about its financial health amid fears of a broader banking crisis.
Wyden said Wednesday that Credit Suisse's "pending acquisition does not wipe the slate clean," urging the U.S. Justice Department to follow through on its pledge to "crack down on corporate offenders, particularly repeat offenders like Credit Suisse."
"In addition to a significant penalty for the bank, the individual bankers involved in these schemes must also face criminal investigation," Wyden added. "It simply makes no sense to allow the bankers who have their hands on these hidden accounts and enable tax evasion to get away scot-free. Finally, the cases detailed in this investigation are textbook examples of why Democrats gave the IRS new funding for enforcement. Republican budget cuts have decimated the IRS's ability to root out this kind of offshore tax evasion scheme, but Democrats are committed to stepping up enforcement against wealthy tax cheats."
In total, the Senate Finance Committee said it found evidence that Credit Suisse helped potentially more than two dozen American families hide upwards of $700 million at the bank after the 2014 plea agreement with the Justice Department.
Citing two former Credit Suisse employees, CNBC reported Wednesday that "although the bank did disclose and close many American accounts after its 2014 plea agreement, some bankers worked with high net worth clients to keep certain Americans at the bank, by changing the nationalities listed on their accounts and ignoring evidence that the account holders were Americans."
"In other cases, they helped American clients move money to other banks, without reporting those transfers to U.S. authorities," the outlet added.
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Bailing Out the Undeserving Rich—Again
Wealth creates power; power creates more wealth. Unattended, this can become a vicious cycle.
Mar 20, 2023
Last week’s bailout of small banks (and it was a bank bailout) needs to be seen in the larger context of America’s soaring inequality.
The standard conservative explanation for why inequality has widened is that individuals are paid what they’re “worth” — and that a few Americans at the top are now worth extraordinary sums while most Americans are not.
Their argument is easily confused with a moral claim that people deserve what they are paid in the market. Yet the amounts people are paid are morally justifiable only if the legal and political institutions defining the market are morally justifiable, which they are not.
Markets depend on who has the power to design and enforce them — deciding what can be owned and sold and under what terms, who can join together to gain additional market power, what happens if someone cannot pay up, how to pay for what is held in common, and who gets bailed out.
These are fundamentally moral judgments. Different societies at different times have decided these questions differently. It was once thought acceptable to own and trade human beings, to take the land of indigenous people by force, to put debtors in prison, and to exercise vast monopoly power.
So we need to ask: Is it morally acceptable that the typical worker’s wage has stagnated for the last 40 years while most of the economy’s gains have gone to the top? Do we believe that people who are rich are succeeding because of their own inherent worthiness or because the game is rigged in their favor? Have people who are poor failed, or has the system failed them? Is it morally acceptable that the pay of American CEOs has gone from an average of 20 times that of the typical worker 40 years ago to over 300 times today? Are the denizens of Wall Street — who in the 1950s and 1960s earned modest sums but are now paid tens or hundreds of millions annually — really “worth” that much more now than they were worth then?
Inequality in America began widening in the late 1970s and then took off. Inequality hasn’t widened nearly as much in other advanced economies. Why not?
Corporate and financial executives in America have done everything possible to prevent the wages of most American workers from rising in tandem with productivity, in order that more of the gains go instead into corporate profits and stock prices. Their major strategy has been to make workers less secure so they accept lower real wages (adjusted for inflation).
Some of this insecurity has been the result of trade agreements that have encouraged companies to outsource jobs abroad — protecting the firms’ intellectual property and financial assets but not the labor value of the people who work for them.
Some insecurity has resulted from shredded safety nets. Public policies that emerged during the New Deal and World War II placed most economic risks on large corporations through wage contracts and employer-provided health benefits along with Social Security, workers’ compensation, and 40-hour workweeks with time-and-a-half for overtime.
Now, those safety nets are mostly gone. Full-time workers who had put in decades with a company can find themselves without a job overnight — with no severance pay, no help finding another job, and no health insurance. Today, nearly one out of every five working Americans is in a part-time job. Two-thirds live paycheck to paycheck. Employment benefits have shriveled: The portion of workers with any pension connected to their job has fallen from just over half in 1979 to under 35 percent.
Some insecurity has resulted from the government’s policy of fighting inflation by raising interest rates to slow the economy — putting most of the inflation-fighting burden on average workers who thereby lose their jobs or don’t get real wage gains, rather than on corporations through tough antitrust enforcement, laws against price gouging, and price controls.
Most basically, the prevailing insecurity is due to the demise of labor unions. Fifty years ago, when General Motors was the largest employer in America, the typical GM worker earned $35 an hour in today’s dollars. America’s largest employer is now Walmart, and the typical entry-level Walmart worker earns about $9 an hour. The GM worker was not better educated or motivated than the Walmart worker.
***
The people who now hold a record share of the nation’s wealth justify their wealth (and their low tax rates) by utilizing three myths.
The first is trickle-down economics. They claim that their wealth trickles down to everyone else as they invest it and create jobs. Yet for over 40 years, as wealth at the top has soared, almost nothing has trickled down. (Trump provided a giant tax cut to the wealthiest Americans, promising it would generate $4,000 in increased income for everyone else. Did you receive it?)
The super-wealthy do not create jobs or increase wages. Jobs are created when average working people earn enough money to buy all the goods and services they produce, forcing companies to hire more people and pay them higher wages.
The second myth is the “free market.” As I noted above, the ultra-rich claim they’re being rewarded by the impersonal market for creating and doing what people are willing to pay them for. The wages of other Americans have stagnated, they say, because most Americans are worth less in the market now that new technologies and globalization have made their jobs redundant.
Rubbish. There’s no reason why the “free market” would reward vast multiples of what the rich were rewarded decades ago. Besides, the market can induce great feats of invention and entrepreneurialism with lures of hundreds of thousands or even millions of dollars — not billions.
The ultra-wealthy have rigged the so-called “free market” in America for their own benefit. Billionaires’ campaign contributions have soared from a relatively modest $31 million in the 2010 elections to $1.2 billion in the most recent presidential cycle — a nearly 40-fold increase. What have they got for their money? Tax cuts, freedom to bash unions and monopolize markets, and government bailouts. Their pockets have been further lined by privatization and deregulation.
The third myth is that they’re superior human beings — rugged individuals who “did it on their own” and therefore deserve their billions.
Baloney. Sixty percent of America’s billionaires are heirs to fortunes passed on to them by wealthy ancestors. Others had the advantages that come with wealthy parents.
Don’t fall for these myths. Trickle-down economics is a cruel joke. The so-called “free market” has been distorted by huge campaign contributions from the ultra-rich. The ultra-rich were lucky and had connections.
There is no moral justification for today’s extraordinary concentration of wealth at the very top. It is distorting our politics, rigging our markets, and granting unprecedented power to a handful of people.
***
The last time America faced any comparable degree of inequality was at the start of the 20th century. In 1910, President Theodore Roosevelt warned that “a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power” could destroy American democracy.
Roosevelt’s answer was to tax wealth. The estate tax was enacted in 1916, and the capital gains tax in 1922. Since that time, both have eroded. As the rich have accumulated greater wealth, they have also amassed more political power — and have used that political power to reduce their taxes.
Years later, Franklin D. Roosevelt saw the 1929 crash not only as a financial crisis but as an occasion to renegotiate the relationship between capitalism and democracy. Accepting renomination in 1936, he spoke of the need to redeem American democracy from the despotism of concentrated economic power.
“Through new uses of corporations, banks and securities,” he said, an “industrial dictatorship” now “reached out for control over Government itself … [T]he political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people’s property, other people’s money, other people’s labor — other people’s lives … Against economic tyranny such as this, the American citizen could appeal only to the organized power of Government. The collapse of 1929 showed up the despotism for what it was. The election of 1932 was the people’s mandate to end it.”
FDR gave workers the power to organize into labor unions, the 40-hour workweek (with time-and-a-half for overtime), Social Security, unemployment insurance, and workers’ compensation for injuries. He raised taxes on the top. And he regulated finance — making banking boring.
Since then, these reforms have also eroded.
The two Roosevelts understood something about the American economy and the ultra-rich that has now reemerged, even more extreme and more dangerous. Wealth creates power; power creates more wealth. Unattended, this can become a vicious cycle.
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This Is Not a Repeat of the 2008 Financial Crisis, But It Is the Same Capitalist Rot
Since 2008, governments and central banks have been trying to prop up the banks through a combination of socialism for the banks, and austerity for everyone else. The result is what we see today.
Mar 17, 2023
Every systemic banking crisis has a trigger that sets it off. In the case of SVB, the reason for its bankruptcy is twofold.
Responding to worried questions raised by many about the ongoing banking crisis that started in the US with the bankruptcy of the Silicon Valley Bank (SVB), and is now affecting Japan and other countries, I can offer the following brief analysis.
The trigger
Every systemic banking crisis has a trigger that sets it off. In the case of SVB, the reason for its bankruptcy is twofold.
- The fall in prices in the secondary market for bonds – basically, US government bonds (treasuries) – which was caused by the Fed rate hike which, in turn, was “imposed” on all central banks by inflation.
- The plummeting in the share prices of Big Tech and of the entire digital ecosystem of small tech start-ups around Big Tech – a decline caused by the Fed’s termination (due to inflation) of money printing.
In more detail, SVB took two hits at the same time.
- The first hit its funds, which were mainly invested in US treasuries. This happened as the rise in interest rates reduced the resale price of these bonds (Why buy “second hand” an older bond that yields 0.5% when you can buy a “new” one that yields 3%?). In itself, this development was not sufficient to bankrupt SVB. As long as SVB was not obliged to sell at a reduced price the older bonds it held, there was no problem. However, because of the second hit, SVB was forced to sell at a large discount. And that’s where the problem started.
- When inflation forced the Fed to stop printing new money (i.e. no more quantitative easing), the flow of funds that were keeping the shares of Big Tech companies in the stratosphere also stopped. Thus, Big Tech shares deflated. As these companies (Google, Amazon, Meta, Twitter, Netflix, Airbnb, Uber, etc.) based their funding on loans taken out by putting up their overvalued stock prices as collateral (e.g., that’s how Elon Musk bought Twitter), Big Tech suddenly ran out of cash. That’s why they started pulling their deposits from banks like SVB.
In short, at the same time as SVB’s capital base was being reduced, depositors were asking for their deposits back. As soon as the news got out that SVB was late in returning depositors’ funds, a classic bank run began.
The cause
The underlying reason why the failure of a medium-sized bank in California created so much angst worldwide is that international capitalism has never been able to get back on its feet after 2008.
In more detail: Central banks (the FED, the ECB, etc.) have one basic tool – the interest rate. When they want to put a brake on economic activity to keep inflation in check, they raise the interest rate, and vice-versa. But, in addition to price stability, central banks have two other goals: the stability of the banking system, and the balancing of liquidity with investment. The interest rate chosen by the central bank is one. That same number (e.g. 3%) must achieve three objectives simultaneously: price stability, banking system stability, and balancing between liquidity and investment.
What could be done as an alternative? The exact opposite: austerity for the banks, with nationalisation of those who cannot survive.
And herein lies the reason why I argue that, after 2008, capitalism cannot recover: There is no longer one interest rate that can achieve all three of these objectives simultaneously. This is the tragedy of central bankers: If they want to tame inflation (at a high enough interest rate), they trigger a banking crisis and, as a result, they are forced to bail out the oligarchs who, despite being bailed out, drive investments below liquidity. If, on the other hand, they impose a lower interest rate to avoid triggering a banking crisis, then inflation gets out of control – with the result that businesses expect interest rates to rise, which discourages them from investing. And so on and so forth.
Back to 2008, then?
No, for two reasons. First, the problem for US banks today is not that their assets are junk (e.g. structured derivatives based on red loans) as they were in 2008, but that they own government bonds which they are simply forced to sell at a discount. Second, the Fed bailout announced yesterday is different from the one in 2008 – today it is the banks and depositors who are being bailed out, but not the bank owners-shareholders. These two reasons explain why bank stocks are falling but there is no total collapse of stock markets.
The fact that there is no total collapse of the stock markets does not, of course, mean that the crisis of capitalism – which has been developing continuously since 2008 – is not deepening. It simply does not have the characteristics of an instantaneous, heavy-handed fall.
What does this development mean for Europe?
In 2008, Berlin and Paris were rejoicing that the banking crash was American and did not concern them – or so they thought. Until they realised that Franco-German banks were loaded with the toxic US derivatives that bankrupted Lehman.
Today, Franco-German banks don’t seem to have the same problem – rather, they are being spared due to the antiquated structure of the European economy. What do I mean? Franco-German banks have not lent large amounts to European Big Tech for the simple reason that European Big Tech doesn’t exist – they still lend to car manufacturers and extraction companies. So, I don’t see a European SVB on the horizon.
That doesn’t mean, of course, that European banks are safe. Their own funds are also invested in bonds whose prices have fallen. A large deposit flight will create the same problems here as we are seeing in the US. Such a flight could come from parts of the financial system that one cannot imagine – for example, from the insurance sector (as in Britain last autumn) or from a collapse of the weak Credit Suisse, which has long been suffering.
What should have been done?
Since 2008, governments and central banks have been trying to prop up the banks through a combination of socialism for the banks, and austerity for everyone else. The result is what we see today: The metastasis of the crisis from one “organ” of capitalism to another, with the magnitude of the crisis increasing with each such metastasis.
What could be done as an alternative? The exact opposite: austerity for the banks, with nationalisation of those who cannot survive. And socialism for workers – a basic income for all, a return to collective bargaining and, further out, new forms of participatory ownership of high- and low-tech companies. In other words, nothing short of a political revolution.
To those who fear the idea of a political revolution, my message is simple: Prepare to pay the price of the escalating crisis of a capitalism determined to take us all to its grave.
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What Will It Take to End the Billionaire Bailout Society We Live In?
With echoes of 2008, the collapse and bailout of Silicon Valley Bank shows little has changed for reckless financial actors. Exactly how long will we allow this to continue?
Mar 16, 2023
In case we need any more proof, the bailout of the Silicon Valley Bank (SVB) is yet another overt sign that we are operating within a new version of capitalism. The wealthiest among us have little fear of losing money from their most important financial investments. They know they will be bailed out, and the rest of us will pick up the tab.
The crisis at SVB has made a mockery of bank deposit insurance and private banking. In the US, bank deposits are insured up to $250,000. If the bank fails, those with accounts below that amount are fully protected. But deposits over that amount are not.
The reason is straightforward. If you insure all accounts, no matter their size, bank executives will have every incentive to maximise their profits by investing depositor money in the riskiest, highest-yielding investments they can find.
If they succeed, the bank officers and investors become rich. If they fail, the government makes the depositors whole. It’s a business model with little downside.
This logic has been understood since the first bank insurance was debated and put in place during the 1930s. (President Roosevelt worried that bank insurance would unfairly subsidise poorly run banks.) So why is this rule being breached now?
The reasons given are many. Small businesses with sums in SVB above $250,000 won’t be able to make payroll. Workers will be laid off. Cutting-edge high-tech enterprises will fail. People will lose confidence and cause bank runs. The entire financial system, it is implied, is so interconnected that a failure of one bank may take down many others, and so on.
But perhaps the major reason in the case of SVB’s bailout has to do with the very wealthy venture capitalists who are invested in many of the tech start-ups that have their money parked in SVB accounts. These VC moguls, many of whom profess to be anti-government libertarians, made it clear to the political establishment that a bailout was required – and immediately!
This time, they didn’t care about bailing out the investors or bank officers. Those days are over. The big money was wrapped up in more than $200 billion in uninsured deposits. Their argument was simple—we are just too important to America for it to allow our operations to suffer financially. We are the backbone of high tech, of innovation, of American economic leadership. (And we put a lot of money into your political campaigns.)
Gutting regulation
SVB’s failure—and the failure of New York-based Signature Bank that followed—will lead to much hand-wringing about the need to tighten regulations, which were weakened in 2018 during the Trump administration.
SVB lobbied successfully to avoid facing the same regulations as the “systemically important” mega-banks. They wriggled out of some of the strongest provisions of the Dodd-Frank banking legislation, as the bank assets threshold was increased from $50 billion to $250 billion. (Barney Frank, the Frank in Dodd-Frank, incredibly, supported the weakening of his own bill. He sits on the board of the failed Signature Bank, having received more than $2.4 million in cash and stock awards over the past seven years.)
While the need for tighter regulations will dominate the discussion, we are missing the bigger picture. The financial barons and their CEO partners have a stranglehold over our economy: They are too big to fail and too politically important to suffer any appreciable financial harm. We will always bail them out, or the economy will crash, harming millions of working people.
It wasn’t always like this.
After the Great Depression, banking in the US was tightly regulated. One measure of this government control shows up in the income received by bankers. Between WWII and 1980 or so, there was virtually no difference in income between financial and manufacturing professionals.
That changed in a hurry after the Reagan-Thatcher idea of government captured the minds of most policymakers. The goal was to get the government out of the economy and get its foot off the necks of Wall Street/City financiers. Let them be free to create, free to build, free to drive the economy forward. Let them fund mergers and hostile takeovers that weed out the weak. Let them use corporate money to buy back stocks, manipulate share prices and stuff their own pockets. Let them become rich and richer as they lead us to a brighter, better world.
Once deregulation started, money flowed to the top. In the US, the gap between the top 100 CEOs and an average worker was about 40 to 1 in 1980. Today it is closer to 1000 to 1. And as the money flowed upwards, more deregulation followed.
Both political parties tripped over themselves to compete for Wall Street cash. The Democrats, under Bill Clinton, broke through Glass Steagall—the wall created during the New Deal that separated risky investment banking from the insurance industry and commercial banking.
And they deregulated derivatives that allowed for financial betting involving tens of trillions of dollars. It was argued that these bets would stabilise the financial system by spreading risk far and wide.
Instead, it brought the system to its knees. The entire financial system froze in 2008, causing six million American workers to lose their jobs in a matter of months due to no fault of their own.
The government responded by bailing out those banks and basically guaranteeing their profits. It allowed the failed banking executives to stay in control, and none of the financial criminals were prosecuted. This announced to all who cared to notice that we had entered a phase of capitalism we could call the Billionaire Bailout Society.
To be sure, new regulations had to be passed to appease a furious public. Dodd-Frank forced the large banks to keep more cash on hand and to go through periodic stress tests. But should a crisis reach those banks, does anyone really believe they will be allowed to fail?
The question to ask right now must go beyond how to re-regulate massive for-profit private banks. The real question is, what will it take to disband the Billionaire Bailout Society?
The SVB event tells us that any bank that is well-connected or simply large enough to cause financial chaos will have its depositors bailed out – all of them. But then, how are such banks free enterprises?
The next step should be obvious. Our only realistic path away from having to bail them out over and over again is to nationalise large parts of the banking system. If these financial institutions are so interconnected that we can’t let them fail, they should be run as publicly owned utilities.
I put it this way at the end of Looting of America, written in 2009:
Let’s hope we don’t throw away much of our children’s inheritance because we did not have the courage to do the obvious: Take over the failing major banks, drastically trim their astronomical salaries, control their hazardous financial engineering, and run the damn things for the good of us all….
If by the time you read these words, we have avoided a full-scale depression, we should consider ourselves more fortunate than wise. Or as Bob Dylan lamented:
An’ here I sit so patiently
Waiting to find out what price
You have to pay to get out of
Going through all these things twice
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'This Is Scary': Financial Industry Panic Spreads as Credit Suisse Teeters
"Is this the next financial crisis unfolding? It feels like it may be—and all because of reckless increases in interest rates by central banks," argued one political economist.
Mar 15, 2023
A vanishingly short period of relief in U.S. and global markets was shattered Wednesday after the scandal-plagued Swiss banking giant Credit Suisse announced that its auditor identified "material weakness" in its financial reporting and the firm's largest investor—the Saudi National Bank—said it wouldn't inject more cash to bolster the company.
As its share price plunged, Credit Suisse intensified concerns about its financial health—and broader alarm about the stability of global markets—by pleading with the Swiss National Bank and the regulator Finma to issue public statements of support for the lender, which controlled roughly $580 billion in assets at the end of last year.
"The bank said it is working to address the problems [with its financial reporting], which 'could require us to expend significant resources,'" The Washington Post reported Wednesday. "It cautioned that the troubles could ultimately impact the bank's access to capital markets and subject it to 'potential regulatory investigations and sanctions.'"
The fresh crisis at Credit Suisse, which comes just days after two U.S. banks collapsed, compounded fears that seemingly isolated problems at individual financial institutions could signal a deeper systemic threat with far-reaching implications for the interconnected global economy.
"This is scary—financial markets are now betting on Credit Suisse failing—and no one can pretend there will not be a fallout from that," Richard Murphy, a professor of accounting practice at Sheffield University Management School in the U.K., wrote Wednesday, pointing to the soaring price of the bank's five-year credit default swaps, which prompted flashbacks to the 2008 global financial crisis.
"Is this the next financial crisis unfolding? It feels like it may be—and all because of reckless increases in interest rates by central banks," Murphy added.
Experts and analysts have argued that—along with years of deregulation—the U.S. Federal Reserve's rapid interest rate hikes contributed to the fall of California-based Silicon Valley Bank (SVB), which sold its bond portfolio at a major loss last week after it declined in value due to the Fed's actions.
While U.S. lawmakers have lambasted SVB for poor risk management, the firm was hardly alone in taking on large bond holdings when interest rates were low only to watch them lose value precipitously as central banks jacked up rates to combat high inflation.
"Investors said Credit Suisse's problems were a reminder that Europe's banks also had large holdings of bonds that had been hammered by rising interest rates," the Financial Times reported.
As The American Prospect's David Dayen put it Wednesday, "As long as interest rates keep rising, more banks will be exposed."
"Credit Suisse is in principle a much bigger concern for the global economy than the regional U.S. banks which were in the firing line last week."
Just a week ago, it appeared that Fed Chair Jerome Powell was bent on continuing to raise interest rates even amid mounting warnings about the potentially devastating impacts on millions of workers whose wages and jobs are on the line.
But faced with growing panic in the financial sector, Powell is now widely expected to step on the brakes—at least temporarily—at the Fed's policy meeting next week. Powell is himself a former investment banker, and Wall Street lobbies the Fed on a range of issues.
Reuters reported Wednesday that "expectations for the U.S. central bank's next move have swung wildly in recent days, after the sudden failure of two regional banks late last week triggered alarm about the health of the banking system and raised doubts about how much further the Fed may take what has been an aggressive fight against stubbornly high inflation."
Turmoil at Credit Suisse, which insists its balance sheet is "strong," will likely cement the case against further Fed rate hikes in the near future, analysts suggested.
The Treasury Department is reportedly monitoring news at Credit Suisse, whose U.S. arm is overseen by the Fed.
"Credit Suisse is in principle a much bigger concern for the global economy than the regional U.S. banks which were in the firing line last week," Andrew Kenningham, chief Europe economist with Capital Economics, wrote in a research note on Wednesday. "Credit Suisse is not just a Swiss problem but a global one."
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Biggest Banks Fueling Climate Disaster With Billions Poured Into 'Extreme Fossil Fuels'
"Our planet just can't take it."
Jun 21, 2017
Threatening a climate-stable planet, the world's biggest banks are continuing business-as-usual by continuing to provide funding for "extreme fossil fuels."
So finds the latest Fossil Fuel Finance Report Card--produced by Rainforest Action Network, BankTrack, Sierra Club, and Oil Change International--which defines the "extreme" sources as tar sands, Arctic oil, ultra-deepwater oil, coal mining, coal power, and liquefied natural gas (LNG) exports.
As RAN said Wednesday in an email to supporters: "To keep the planet under 1.5 degrees of global warming and stop human rights violations, banks *must* stop financing extreme fossil fuels. Our planet just can't take it."
The "Banking on Climate Change" report--released in collaboration with over two dozen organizations including Bold Alliance, SumOfUs, West Coast Environmental Law, and Indigenous Climate Action--looks at 37 major banks' lending and underwriting transactions, and gives them A-through-F grade based on their policies. It also gives a brief look at banks' human rights failures.
Despite its worrying findings, there is a bit of good news the report. From 2015 to 2016, the analysis found, the amount the banks poured into extreme fossil fuels dropped 22 percent, from $111 billion down to $87 billion. But the report cautions that for the sake of the planet, this must not be "just a temporary decline."
Further qualifying the good news, the report adds:
the $290 billion of direct and indirect financing for extreme fossil fuels over the last three years represents new investment in the exact subsectors whose expansion is most at odds with reaching climate targets, respecting human rights, and preserving ecosystems.
Another startling finding noted by the report:
12 of the 37 banks increased their financing to the top extreme fossil fuel companies from 2015 to 2016, after the Paris Agreement was inked: Australia and New Zealand Banking Group (ANZ), Bank of America, Bank of Montreal, Barclays, China Construction Bank, Citigroup, JPMorgan Chase, Mizuho Financial Group, Santander, Toronto-Dominion Bank (TD), UBS, and UniCredit.
A case study laid out in the report is TransCanada's 1,179-mile Keystone XL pipeline (KXL), which would bring tar sands crude from the Canadian province of Alberta to Nebraska and link to an existing network of pipelines. While the pipeline is back, the report says, "so is the people power that fought to stop it the first time."
And given "the heated criticism banks received for financing the Dakota Access Pipeline (DAPL), any banks associated with KXL or TransCanada face even greater reputational risk than before." The report goes on:
It is yet to be determined whether TransCanada will seek project-specific financing to construct KXL. In the absence of direct project finance, it is the 21 banks on TransCanada's revolving credit facilities that are, effectively, the funders of Keystone XL. Of the banks analyzed in this report, Bank of America, Bank of Montreal, Barclays, Canadian and Imperial Bank of Commerce (CIBC), Citi, Credit Agricole, Credit Suisse, Deutsche Bank, HSBC, JPMorgan Chase, Mitsubishi UFJ Financial Group (MUFG), Mizuho, RBC, Scotiabank, SMFG, TD, and Wells Fargo all participate in multi-billion dollar lines of credit to TransCanada.
JP Morgan Chase earned the dubious distinction of being the biggest Wall Street funder of extreme fossil fuels.
"In 2016 alone they poured $6.9 billion into the dirtiest fossil fuels on the planet," said Lindsey Allen, RAN's executive director. "On Wall Street they are number one in tar sands oil, Arctic oil, ultra-deepwater oil, coal power, and LNG export. Even in this bellwether year when overall funding has declined, Chase is funneling more and more cash into extreme fossil fuels. For a company that issues statements in favor of the Paris Climate Accord, they are failing to meet their publicly stated ambitions."
The report comes amid increasing calls to "keep it in the ground," alongside new state- and city-led efforts to move forward on climate action, and amid growing evidence that fossil fuel investments make poor economic sense.
"There's no question that funding climate change is a deadly investment strategy," stated Jenny Marienau, 350.org's U.S. campaigns director. "Yet banks around the world are funneling billions of dollars into the fossil fuel projects leading us closer to catastrophic warming every day."
"Movements like the Indigenous-led effort to Defund DAPL are rightfully pressuring banks to divest from infrastructure like the Dakota Access pipeline that puts profits before human rights and a livable future," Marienau said. "It's up to us to resist these disastrous projects, push back on these fatal investments, and build the renewable energy solutions we need."
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Oxfam's Crystal Ball Confirmed: The Top 1% Now Own Over Half of the World's Wealth
The world is experiencing an immense problem with wealth inequality, and it’s not just a problem of economics, it’s a problem of power.
Oct 22, 2015
The world's richest 1 percent owns more wealth than the bottom 99 percent combined. This finding comes from Credit Suisse's Global Wealth Report for 2015, released last week. Last year, Credit Suisse found the wealthiest 1 percent of adults owned 48 percent of global wealth. According to the new report, the top 1 percent holds 50.4 percent of the world's household wealth.
Credit Suisse's findings align with Oxfam's prediction that global wealth inequality will only increase. Last January, we predicted that the richest 1 percent would capture more than half of all household wealth by 2016. Our prediction was right, but we were too conservative since it happened a year early. Alas, our forecast was confirmed, but it's nothing to celebrate.
The situation at the very top of the global wealth pyramid is much more alarming. When we first calculated it in January 2014, the 85 richest individuals owned more wealth than the poorest half of the planet. This trend has also worsened since then. In January, it was down to 80 people.
The implications of rising extreme wealth inequality are greatly worrying. The highly unbalanced concentration of economic resources in the hands of fewer and fewer people impacts social stability within countries and threatens security on a global scale. It makes poverty reduction harder, threatens political inclusion, and compounds other inequalities.
In many ways, today's problem of rising wealth inequality reflects who wields power across societies. For instance, multinational corporations and the very rich can shift their wealth to low-tax jurisdictions and often pay lower rates on their wealth at home than average citizens pay on their hard-earned incomes.
In this respect, the real challenge is how ordinary people can take back political power from wealthy elites with the resources to rig the economic game in their favor. The rigging is evident in the ways elites can undermine democracy and equal representation by infusing huge amounts of cash into the political process. It's also clear in the influence elites use to 'capture' the marketplace of ideas, perpetuating myths like trickle-down policies helping the poor and austerity measures are "responsible" - both of which have been consistently disproven.
Findings such as Credit Suisse's are awaking wide publics to the huge economic disparities that define the modern world. And people are increasingly calling attention to government policies that only work for the wealthy. For instance, in a recent Pew survey, respondents from 34 emerging and developing economies indicated corruption was their country's second biggest problem. The links between corruption, crony capitalism, and inequality aren't hard to find. A study of India's new billionaires found that nearly half made their fortunes in 'rent thick' sectors, meaning their wealth depended on exclusive government giveaways (such as permission to build on public lands or control over the telecom spectrum). Corruption and bribery are often behind such exclusive privileges.
What's encouraging is that citizens from rich and poor countries are pushing back. There seems to be a global zeitgeist that capitalism has descended from being about competition and innovation to monopoly and corporatism. The latter is responsible for the massive inequalities we are grappling with today, especially the unfathomable concentration of the world's wealth among an incredibly small number of people. The Credit Suisse figures empower citizens to hold governments to account for today's inequalities with the cold, hard data to back up the injustices of poverty and power we see every day.
This blog was co-authored by Stephanie Fontana, a Research Intern at Oxfam America.
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'Out of Control' Inequality: Global One Percent Owns Half of World's Wealth
The Credit Suisse report shows worldwide inequality growing even faster than experts had predicted
Oct 14, 2015
According to a new report from a leading multinational bank, the top one percent of households "account for half of all assets in the world. "
The 2015 Credit Suisse Global Wealth Report puts worldwide wealth inequality at a level "possibly not seen for almost a century," the researchers write. The data also reveals a declining middle class and that the poorest half of the world's population owns just one percent of its assets. Meanwhile, the number of "ultra-wealthy" people continues to climb.
"The 'trickle up' economic model is working its magic for the super-rich at the expense of the rest."
--Claire Godfrey, Oxfam
Credit Suisse's analysis aligns with a warning from Oxfam, an international humanitarian group, issued earlier this year that the wealthiest one percent of people on the planet will own at least half of the world's wealth by 2016.
"The Credit Suisse report shows that inequality is growing faster than we had thought," said Claire Godfrey, global inequality policy lead for Oxfam. "The fact that it has happened this year underlines the urgency of the problem."
Furthermore, Godfrey said, the report illustrates how "the 'trickle up' economic model is working its magic for the super-rich at the expense of the rest. This is bad news for global economic growth and bad news for democracy. Our political leaders must take action now to raise the incomes of the poor and maintain the incomes of the middle class."
The annual report also shows that more global wealth comes from investments--which most people do not have. "Which leads to an inescapable conclusion," NPR's Nancy Marshall-Genzer explained. "If the richest people in the world get more of their wealth from financial assets like stocks and bonds, the wealth gap gets even wider."
Of course, economists have been warning of these consequences for years. As Oxfam Great Britain's chief executive, Mark Goldring, told the Guardian: "This is the latest warning extreme inequality is out of control. Are we really happy to live in a world where the top 1 percent own half of the wealth and the poorest half own just 1 percent?"
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