Perhaps you also caught CNBC’s Erin Burnett and Mark Haines interviewing AFL-CIO President Richard Trumka last Thursday morning in front of the New York Stock Exchange, prior to a labor union rally near Wall Street later in the day. Talk about shock and awe!
Shock at the blatant hypocrisy. Awe at the depth and breadth of economic illiteracy. This was populist demagoguery at it’s finest, and one could write a book on the distortions, fallacies and misinformation in just this one seven minute interview. Let’s take a look at some highlights:
Haines: What do you want? What are you trying to prove or point out today?
Trumka: Well there’s three things that we want to say. These guys destroyed eleven million jobs. They wrecked the economy. They got bailout money. And they haven’t learned a lesson. So we want them to do three things. We want them to pay their fair share, to create the jobs that they destroyed. Two, we want them to stop fighting Wall Street reform, because they send a legion of lobbyists to D.C. to stop it from happening. Three, we want them to start lending to small and mid-size banks so they can create jobs.
Have we entered the Twilight Zone? A person takes on a NINJA loan (No Income, No Job or Assets), pushed by a lender that is ultimately implementing Congress’ push to increase home ownership. Their mortgage payment rises, they default on the loan, and it’s Wall Street’s fault? Aided and abetted by legislators, union contracts and guaranteed benefits accelerate the growth in state and local budgets, pushing many to near bankruptcy, and it’s Wall Street’s fault? The Federal Reserve and Treasury tell banks to boost their capital ratios, and everyone complains about bad risk management. Banks respond by tightening lending requirements, and Wall Street has destroyed eleven million jobs as a result? What the?
Yes, Wall Street got bailout money, money which many of the banks didn’t want. Just as some firms didn’t want to mark some of their positions to market, the Fed and Treasury didn’t want to mark entire firms to market either, so they tried to hide the more vulnerable companies in and amongst the stronger ones. This is a taking-one-for-the-team the bank industry will never live down, TARP repayments notwithstanding.
Regarding Wall Street reform, didn’t Sarbanes-Oxley solve that problem in 2002? Never mind, that’s a whole other story.
But sending “a legion of lobbyists to D.C.” — now that’s golden. This from an organization whose stated goal, along with the other unions, is to pull out all of the lobbying stops to get Card Check passed, to use the force of government to try to slow the unmistakable downward trend in union membership.
Trumka: We’re fighting to create jobs. There’s nobody out there right now except the labor movement that is fighting to create jobs and taking these guys on. They destroyed eleven million jobs. America needs those jobs back. The labor movement is out fighting for them.
Without a doubt, labor unions have saved jobs. They’ve saved them by ensuring that capital that might have better been re-directed away from the control of bad management and/or into more productive uses stayed where it was, preserving jobs in companies that should have shed them, or even preserving whole companies. But how about actually creating jobs, as in, truly new jobs? It seems like Mr. Trumka doesn’t understand that first and foremost, governments, unions or even small and mid-size banks, do not create jobs. Risk-taking entrepreneurs create jobs. And when the legislative outlook is as cloudy as it is right now, they do the prudent thing, which is to say, they preserve their capital by hunkering down.
Trumka: They destroyed $13 trillion worth of wealth for the rest of America.
I suppose that Mr. Trumka is making some generalized reference to the total reduction in stock market valuations, reflected in peoples’ 401K’s, pensions and other savings vehicles. Markets may have dropped, but is Mr. Trumka actually claiming that these Wall Street firms had the power to move the markets to that magnitude, all the while resisting the obvious opportunity to profit wildly as they controlled its every move? Evidence would seem to prove the contrary. But wait a second. Don’t the unions lead the class-warfare chant that says that most of the stock-market wealth in this country is held by the “rich”? So then it would be the “rich” that took most of the $13 trillion dollar hit. What are we complaining about then? They can afford it, right?
Burnett: How can they create those jobs? I mean, that’s my question. What would you say to them today, if you had Lloyd Blankfein standing here from Goldman Sachs? Mr. Blankfein I need you to do X, to create a job, what do you do?
Trumka: I’d tell him to do a couple X’s. One, pay your fair share. Give us a transaction tax of a quarter of a penny, we’ll get 150 billion to 300 billion dollars, and we’ll start creating jobs in America. Two, start lending to small and mid-size organizations and businesses out there so they can start creating jobs. And three, starting paying your fair share, pay the same level of taxes that they rest of us do, so that we have the revenue in this country to save teachers, to save firemen, save police officers and get this country back on track.
Ah… now we’re seeing the prize. Somebody get the drool buckets. Hundreds of billions of dollars of additional revenue to be brought into government control, so they (and their union buddies, presumably) can direct the money as they see fit. But of course!
And regarding paying the same level of taxes that the rest of us do, let’s see: First, nearly 50% of filers don’t pay income taxes, but my guess is that that’s not what Mr. Trumka would have the banks emulate. Second, all the income of the banks’ employees gets taxed like “the rest of us” — because it’s all the Same Street. But lastly, all of the corporate taxes that the banks (or any company) pays represent funds that could have been spent on something else, such as higher wages, benefits, capital investments, even hiring new employees (i.e., creating jobs).
Burnett: …a lot of these people are tellers, right? And it seems like you’re saying just because you work for a bank you’re a bad person. That’s the feeling… that people get…
Trumka: No, I’m not saying that.
Burnett: Okay, so, so what are you saying though? Because you keep gesturing that these guys destroyed, that these guys did this. Can I get to the point?
Trumka: The banks. The banks and the people that control the banks. Wall… Citibank. Citibank. Citibank.
A slip of the tongue perhaps? Vikram Pandit really isn’t nearly as powerful as you think, Mr. Trumka. Who really controls the banks? That would be the Federal Reserve, the US Treasury, the FDIC, the SEC and a host of other agencies and regulatory bodies that altogether make up the tail of the dog that is our federal government. So let’s direct all of that passion to the right place.
Trumka: They [the banks] need to start lending. Everyone agrees that the lending market is still locked up, that these guys aren’t lending.
Here’s an idea Mr. Trumka: Organizations like yours take in billions each year in “deposits” from your “customers” (the forced dues of your union members, to be perfectly clear). Loan some of it out. If there are so many worthy businesses out there in dire need of loans, and the banks are doing such a terrible job at meeting that need, surely you must be implying that you know of a better way. So do it yourself. Between your union, and Andy Sterns’, and Randi Weingarten’s, and Ron Gettlefinger’s and the rest of them, you could probably scrounge up capital on par with many of the supposedly non-lending Wall Street banks, so it seems like a huge opportunity has been laid at your feet. President Obama would probably go for it. Stealing the Wall Street bank’s customers would be the sweetest revenge, would it not?