Is banking reform possible?

Is banking reform even possible?

As I’ve been following the situation with the meme stocks, Reddit and the mainstream media’s coverage of what’s happening in the stock market, I can’t help but wonder if after the whole thing crashes, is anything really going to change?

The crisis in 2008 was a sign that the financial system was getting more complicated for financial engineering to allow banks and institutions to make more money. Synthetic CDOs, mortgage backed securities, and derivatives markets that didn’t make any sense to the average person. Yet after the collapse of Lehman Brothers and other major banks, it seems like the world forgot.

Wall Street did what it always does, which is throw money at the problem and spend billions of dollars on ‘lobbying’ to make sure the system doesn't change. Lobbying, or legalized bribery as I like to call it, goes a long way in America. 

Why? Because money talks.

When banks are making billions of dollars a year through dark pools, payment for order flow and allowing high frequency trading firms to front-run mutual funds, pension funds and retail investors, why would they want the system to change? This is one of the most lucrative parts of their business. 

When these guys make money, guess where they spend it? 

In politics. 

Remember, whoever controls the money controls the politicians.

Let’s be honest, politicians are puppets. They are voted in to do a job, which is to make sure that they’re donors’ interests are properly accounted for. We like to think that politicians act in the best interest of their constituents, but that’s not entirely true, especially in America. In places like Canada or elsewhere in Europe, I’m sure people go into politics expecting to actually fight for the little guy, but America seems like a totally different ball game.

Money controls everything. Billionaires use their money to lobby politicians on their behalf to play by a different set of rules. Ken Griffin, the head of Citadel, was the second largest donor of the Republican Party and spent millions of dollars to get a tax bill killed in Illinois because he would be paying billions in taxes. He can’t imagine giving that money to the government for them to spend it on his fellow American citizens.

As much as I hope the system will change once this thing crashes, I’m not so sure it will. It’s incredible to be a part of this movement with millions of people banding together to bring down the biggest funds in Wall Street. However, there are also a ton of institutions on the same side as retail who are going to destroy their competition and gobble them up for pennies on the dollar when they go bankrupt. 

Do you really think those guys want the system to change? I’m not so sure.

Money runs America and allows the people at the top to play by a different set of rules. They get power and access to anyone they want and can use their money in whatever ways they see necessary. They spend millions of dollars on accountants and lawyers who make sure their money is held in ways that are the most tax advantageous possible.

There was a recent article published by ProPublica talking about how billionaires have been able to avoid paying tax. Buffett doesn’t pay much income tax because he never takes an income from Berkshire. Bezos didn’t pay a single dime in income tax some years because again, all of his net worth was tied into his stock.

Do I think it’s wrong that billionaires don’t pay as much tax as the average citizen? Absolutely. Yet some of these people have created incredible products and companies that have benefited society in tremendous ways. They should be able to keep a lot of money, yet they absolutely should be paying their fair share in taxes.

It’s difficult because when the tax system is designed by billionaires who don’t want to pay tax, do we really think anything is ever going to change? Not unless you have people in power who don’t bow down to corporate interests and actually stand up for the citizens. 

I do think Bernie, Elizabeth Warren, AOC and others genuinely want to make a difference to the lives of average citizens, but they’re painted in such a terrible light by the media and the wealthy because they're attacking their bank accounts.

In order to make substantial change, you need to attack people’s bank accounts. They absolutely should be contributing more money to the government because if you’ve earned money in a country, you deserve to contribute to that country.

I love debating conservatives on this tax point. One of the conservatives' favourite points is ‘I earned this money on my own through my business and investing in myself and my family so why should I pay the government when they didn’t help me get to where I am? I didn’t take any handouts from anyone so why should I be paying for other people’s handouts?’

You’re not wrong, but it depends how you see it. I always implore people to try and think about their own upbringing. How lucky were you to be born into the family you were born into? How lucky were you to have your parents afford you to send you to a good school? How lucky were you to be born healthy in an environment where you were allowed to make mistakes? How lucky were you to have an education and be able to attend good schools? How lucky were you to have parents who had businesses, accountants and lawyers that could help them set up their finances?

You didn’t earn any of that. You were born into it. My point is if you got lucky enough to be born into situations where you were able to benefit and achieve great monetary success, you should give some of that money to the government so that they can redistribute that to the people who don’t have the same opportunity as you. They didn’t start at the same starting line as you did. They might have been born a woman, or black or gay, or disfigured, or have a genetic condition, or into a family where they were abused their entire childhood. Those people deserve an equal shot at life just as much as you or I do.

One of the main problems in America is people don’t trust the government to properly redistribute that money. They don’t know if that money is going into their kid’s education or into getting better healthcare or better roads and more jobs in their community, and that’s a fair argument.

I know the citizens of the Nordic countries are happy to pay higher taxes because they know their government is spending the money properly to allow everyone in that country to have a more equal shot at life. This is what I loved about living in the Netherlands. You realize just how different that environment is compared to America. Everyone has an equal shot at life as education is free, healthcare is covered, infrastructure is top notch and people are able to get good jobs. These things are not dependent on what family you were born into or how rich your parents are.

My belief is the people in power want to keep it this way. The problem is inequality has never been this high as it was in the 1930s. We all know how that decade ended and it was because of this massive disconnect between the rich and poor, not just in America but around the world.

We’re seeing signs of that today and Covid only exacerbated the problem. Hundreds of millions of people are likely going back into poverty around the world while the rich earned trillions of dollars in the last year sitting on their ass watching their assets explode. The US federal reserve has continued to exacerbate the problem by inflating asset prices like crazy, most of which is owned by the rich.

Hopefully this crash evens out the playing field a bit more. This Ape movement online with AMC and GME is exciting because there’s a feeling that once this thing blows up and the rich lose trillions of dollars, the new found millionaires/billionaires will use their money to tackle the biggest problems facing humanity.

So I don’t know. I’m an optimistic person by nature but history has shown me that when money and power get concentrated in the hands of the few, they will do everything in their power to maintain the charade, even when millions of people lose because of their stupid and risky decisions.

I hope banking reform is possible, but I’m not so sure.