2012년 6월 12일 화요일

[Issue note] Occupy Wall Street!




“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

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