Finance in America: Promoting Inequality and Waste

http://www.truth-out.org/opinion/item/25200-finance-in-america-promoting-inequality-and-waste

Finance in America: Promoting Inequality and Waste
Monday, 28 July 2014 09:41 By Dean Baker, Truthout | Op-Ed

In the crazy years of the housing boom the financial sector was a gigantic cesspool of excess and corruption. There was big money in pushing and packaging fraudulent mortgages. The country paid a huge price for the financial sector's sleaze.

Unfortunately, because of the Obama administration's soft on crime approach to the bankers who became rich in the process; the industry is still a cesspool of excess and greed. Just to be clear, knowingly issuing and packaging a fraudulent mortgage is a crime, the sort of thing for which people go to jail. But thanks to the political power of the Wall Street, none of them went to jail, and in fact they got to keep the money.

Since the penalties for ripping off people are trivial to non-existent, the financial sector finds this to be a much more profitable line of business than actually providing financial services. The New York Times recently reported on the boom in the subprime market for auto loans featuring many of the same abusive practices we saw in the subprime mortgage market during the bubble years. Lenders are slapping on extra fees, changing the terms after contracts are signed, and doing all the other fun things we have come to expect from leaders in finance. The used car industry was sufficiently powerful that it was able to gain an exemption from being covered by the Consumer Financial Protection Bureau.

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The bloated financial sector in the United States is a major engine of inequality sucking money away from poor and middle income households and making folks like Lloyd Blankfein, Jamie Dimon, and Robert Rubin incredibly rich. There are many who want the government to play a role in reducing inequality. That might be a desirable goal. However a higher priority would be to have the government stop playing a role in increasing inequality as it does with its support for the financial industry. The outcome of the plans to dismantle Fannie and Freddie will be an important test of where the money is going.