Monday, November 21, 2011

Why Critics of Wall Street Exist Among Avowed Capitalists

Posted: 11/20/11 10:40 PM ET

A Wall Street banker friend of mine dismissed Occupy Wall Street as a bunch of socialists with too much time on their hands. Indeed, I myself criticized the protestors in an interview on CNN recently by saying that I lived under socialism in Western Europe for 11 years and the complete meltdown of their economies shows it leads to bankruptcy.

[My comment: the recession in Europe had the same cause as the one in the U.S., the fraudulent and reckless action of banks and other financial businesses. And some of the European economies have been recovering better than the U.S.]


But we should not dismiss the protests outright for, whatever they have morphed into, there exists an important message that ought to be heard.

About 18 years ago I started writing columns about how the banking industry is taking over every other profession. My students at Oxford, where I had already served for four years as Rabbi, would discard their training as doctors and attorneys if the investment banks made them offers. I worried that the brain drain into banking would handicap professional talent in so many other sectors. How could it not? With the banks offering starting salaries in the hundreds of thousands of dollars and the potential to make tens of millions a year, you had to be crazy not to accept it.

But even I could not foresee hedge fund managers routinely making half a billion dollars a year or feeling like failures for making just 10 to 20 million, a phenomenon I addressed in my book The Broken American Male. Now, since I am an avowed capitalist, why should there be any issue with banks or those who have legitimately found a means by which to produce staggering wealth, especially when a great many of the hedge fund managers known to me are highly charitable?

For two reasons. The first is that any of us who have dealings with banks have learned just how awful they can be, how condescending, how greedy, and how dismissive. The second is that there seem to be two standards, one for Wall Street, the other for Main Street, and to the extent that OWS has garnered wider support, then it deserves it, because Wall Street refuses to reform itself and insists on retaining unfair privileges.

The same arrogance is manifest in the fact that the fund managers are insisting on retaining their absurd 15-percent capital gains loophole. Said loophole allows hedge fund managers and private equity firms to treat a substantial portion of their compensation as capital gains, meaning they are taxed at 15 percent rather than the 35-percent rate that applies to income such as wages and salary.

To be sure, I think all taxes in this nation are way too high, and the last thing I want to see is tax raised anywhere. But I don't want us little people to be suckers, either. And the idea that the tax rate is 35 percent on income over $379,150 but fund managers like John Paulson, earning as much as $15 billion in a single year, are able to pay a 15-percent tax rate on the majority of their income is unfair.

The same of course applies to the bailouts that were given to banks but did not trickle down to end users


And why, when the banks are borrowing money at 0.25 percent from the Federal Reserve, do we have to borrow at a minimum 3.25-percent prime rate that is often far greater for individuals with even a single credit blemish? Why the huge spread?

This is where the objectors to Wall Street are gaining traction even among avowed capitalists, by demonstrating to the public that too many bankers insist on a privileged position, as if they are masters of the universe whom we have to support.

I don't want to see Wall Street punished, and I don't want bankers treated any worse than anyone else. I reject class warfare. If people work hard and find ways to become extraordinarily wealthy, G-d bless them, and I hope they devote huge sums to charity. But just as the bankers should not be treated worse, they should not be treated better, either. What is needed is an even playing field, which, once achieved, will help reestablish the credibility of bankers and undermine their opposition.


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