Since the Occupy Wall Street movement of 2011 gained national interest, Wall Street has
taken center stage on the political radar.
In particular, candidates Bernie Sanders, and Hillary Clinton, have rallied against
Wall Street’s disproportionate influence in the US and global economy.
So, just how powerful is Wall Street?
Well, in common use, “Wall Street” refers to the American banking industry.
The term is used because Wall Street in New York City is the location of significant financial
markets, including the NASDAQ and the New York Stock Exchange.
These two markets are the largest exchanges in the world, and facilitate the trade of
more than $27 trillion dollars of company stock.
Changes in the global economy are directly reflected in the performance of these stock
markets, and vice-versa.
But stock market capitalization isn’t necessarily a measurement of power, as that money is actually
held by investors and not specifically Wall Street banks.
By comparison, US financial institutions hold roughly $15 trillion dollars in assets, half
of which is controlled by just five banks.
That’s almost the United States’ entire yearly GDP; the largest in the world.
So what does Wall Street do with that money?
Well, a significant portion of it goes towards swaying political policy.
A 2009 study by the Center for Economic and Policy Research found that banking deregulation
in the United States was heavily pushed by banks themselves by way of financial lobbyists.
Deregulation in the 1970s and 1980s was based on the idea that removing government oversight
of the financial system would allow it to flourish, and Wall Street’s profits would
trickle down to Main Street.
In fact what ended up happening was that financial deregulation allowed banks and lenders to
take on riskier loans, as well as bet on the stock market using customer money.
This all came to a head during the late-2000s financial crisis, where it came out that poorly
regulated banks were offering massive mortgages to people who were unable to pay them.
So when the housing market finally collapsed under the weight of these bad loans, it took
down the world’s financial markets as well.
In short, Wall Street’s practices contributed to the downturn in the global economy.
That’s pretty powerful.
But what’s even more powerful is what happened next.
Instead of letting the affected financial institutions fail under the weight of their
bad loans, they were bailed out with public money.
The Treasury department committed roughly $16 trillion dollars, a bailout led by Henry
Paulson, the Secretary of the Treasury.
Paulson was also the former CEO of Goldman Sachs, which received nearly $13 billion dollars
as part of the bailout.
Clearly, Wall Street has a huge amount of money, a huge amount of influence, and even
former CEOs in government positions.
So when candidates like Bernie Sanders promise to take down Wall Street, it may sound like
a good idea, but it's probably harder than you’d think.
But why exactly does Bernie Sanders want to take down big banks, and what’s so bad about
them anyway?
Learn more about the problem with banks being “too big to fail” in this video.
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