“Occupy Wall Street!”
On
September 17th in 2011, the ‘Occupy Wall Street’ protest movement
began in Manhattan. Thousands of protesters picketed with signs ‘Occupy Wall
Street!’ and chanted their slogan ‘We are 99%’ which is versus 1% of the rich.
The movement which was against economic inequality and corruption caused by
avarice of the financial sector symbolized by the Wall street has continued at
Zuccotti Park. The Occupy Wall Street movement attracted considerable amounts
of global attention, and soon it spread out around the world with apposite
transformation for each region. This essay will describe mainly the economic
background of the protest movement ’Occupy Wall Street’ in terms of economic
situation and the main cause, and look into its goal and further discussions on
solutions.
The
OWS movement has direct connection with the recession originated from the
Subprime mortgage crisis in 2007. The major trigger for the protest was the
outrage of people with no job. Many people lost their jobs as the crisis spread.
Unemployment rate doubled after the crisis. Especially, according to the
research by the Bureau of Labor Statistics Data of U.S. and the one of Korea, the
youth unemployment rate in the U.S. reached 17% in 2011, which is more than
double of the one in Korea(8%). This highly educated, yet job-less young
generation became the leading group in the protest.
The
disastrous crisis was ascribed to greedy and speculative investment banks in
Wall Street. Investment banks raked in enormous amount of money by the time the
crisis occurred. According to a report from New York State department of labor,
the average salary for Wall Street bankers was six times higher than the one for
workers in other sectors. Investment bankers received huge salary and often
even bigger bonus which is several times their salary. The way which investment
bankers made this possible for them was to make derivatives[1].
The derivatives which brought out
the Subprime mortgage crisis in 2007 was the product which was supposed to
compensate for loss of price in funds invested in the subprime mortgage loan securities.
There was a huge loss in the funds because of tremendous decrease in price of
real estate which made the price of subprime mortgage loan securities decline
as a chain reaction. Banks could not fulfill the contract that they should
compensate for the loss, and they went bankrupt. Lehman Brothers and Bears Tearns
which were two of the major investment banks in Wall Street shut down, and both
people and institutions that bought the derivatives or invested in these banks
lost their money.
Other banks like the Citi Bank were
bailed out by the U.S. government because they were too big to fail and let so
many people suffer from expected bigger loss. The money the government put in
these banks for bailing was tax income from U.S. citizens. Although bankers in
these banks took too much risk selling perilous derivatives for earning
astronomical amount of money and they actually took the money, they did not
take any personal responsibility. The money from citizens who are in the low
level of wealth hierarchy aided them when their greed got themselves in
trouble. Bankers who are the main culprit of the crisis are still rich. However,
99% of citizens who are not wealthy suffer from the unprecedented bad economic
situation in 21st century.
Protesters
of the Occupy Wall Street movement insist that the financial sector should do
ethical management without avarice in terms of their business of operating
money and influence on politicians. Banks which gained money from citizens
through deposit often invest in too risky business with depositors’ money to
earn higher profit. If this goes bad, even depositors can lose their money. Banks
gave reckless loans to clients with low credit rating so as to get more interest
on the loans because the lower the credit a borrower has, the higher the
interest is on the loan. Even though banks have obligation to take care of
depositors’ money, they overlooked it and also undermined the possibility of
borrowers’ insolvency. They gambled for higher incentive pay. Apparently they
lost hugely but shifted their fault onto others of the 99%
Not only banks should manage money with
morality, but also protesters maintain that banks should not manipulate the
regulatory sector for their interests with immense lobby on politician. Since
President Ronald Reagan deregulated on the banking industry with Wall Street
bankers’ massive lobby, the bankers’ powerful influence on regulatory sector
have persisted in the financial sector. Wall Street banks spent about
$60,000,000 in lobbying activities in 2011, which the documentary movie ’Inside
job’ revealed out. Most of the U.S. Secretaries of the Treasury in recent
history who made financial regulatory system and led the government regulatory
institution were from Wall Street. They led deregulation of the banking
industry so that banks could engage in high risk speculation for higher return
and also sell various financial derivatives. OWS protestors assert that banks
should stop coveting political power for their egoistic purpose.
As one of solutions on how to control the greed of the financial sector
and to make them more responsible, Paul Volker, a former chairman of the United
States Federal Reserve proposed Volker Rule. It inhibits banks from investing
in speculative businesses which contrast the depositors’ gain. Besides IMF(International
Monetary Fund) suggested ‘the banking tax’ as another solution. It would help
financial market to avert from another financial crisis and to recoup the money
used in bailout with the tax income imposed on banks. These two discussions are
parallel to each other in the way that they regulate banks to be more
responsible for their business and their duty.
A bank has its social
role to channel money from households as deposit to firms as loans to make the
economy more energetic. However, the most critical principle for banks is to
keep households’ deposit safe at the same time. It is nevertheless true that
the importance of this fundamental and essential duty has faded by avarice of
the financial sector. Wall Street banks should remind of its original duty and
correct themselves to the ethical banks, which are just the same as what Occupy
Wall Street protesters claim.
<Reference>
Writers
For the 99%(2012). Occupying Wall Street
: The Inside Story of an Action That Changed America. Haymarket.
Charles Ferguson(2010). Inside Job [DVD].
H. Blodget(Oct. 11, 2011). Business Insider. CHARTS: Here's What The Wall Street Protesters
Are So Angry About. Retrieved from
http://www.businessinsider.com/what-wall-street-protesters-are-so-angry-about-2011-10?op=1
R. Spencer(16 March 2012). The Guardian. Occupy in America: looking back on six
months of protest. Retrieved from http://www.guardian.co.uk/world/us-news-blog/2012/mar/16/occupy-america-looking-back
M. Kim(Oct 13, 2011). Korea JoongAng Daily. Occupy Wall Street spreads to Seoul. Retrieved
from http://koreajoongangdaily.joinsmsn.com/news/article/html/716/2942716.html?cloc=joongangdaily%7Chome%7Cnewslist1
the Bureau of Labor Statistics Data of U.S.(2011). Employment status of the civilian
noninstitutional population by sex and age, seasonally adjusted. Retrieved
from http://www.bls.gov/web/empsit/cpseea03.htm
New York State department of labor(2011). Occupational wages. Retrieved from
http://labor.ny.gov/stats/lswage2.asp#13-0000
[1] Derivatives
here are financial products which guarantee compensation for possible loss of
the price in the other financial products
