In the more than 150 years since the end of the Civil War, Black American wealth remains a fraction of that held by White Americans. Just after emancipation in 1865, African Americans owned 0.5% of national wealth. While closing this divide is essential to achieving racial equity in this country, it’s important that we apply the right tools for the job. We can’t properly solve problems without understanding their origins. The growing divide between White wealth and Black wealth is a product of economic systems designed to extract wealth from Black, Indigenous, and other people of color and redirect it to the wealthy, almost uniformly White elite.
The concept of carried interest is quite old, and in the right circumstances, makes a good deal of sense. By the 13th century, Venetian investors were offering seafaring merchants a quarter of the overall profits in exchange for selling their goods in foreign markets. That percentage was the carry—it was a return on what we’d call the merchants’ sweat equity. Private equity firms, which pool money from investors such as pension funds and use it to buy and restructure (euphemism alert!) existing companies, borrowed the concept, but not the risk. They typically take a 2 percent annual cut of the assets they manage as a fee, and then a 20 percent share of the profits when those assets are sold. There’s no sweat equity—the only time private equity titans brave the high seas is on a yacht—but there also isn’t much regular equity, either. The firms’ final take is vastly disproportionate to whatever small sum they might have contributed.
The lack of a Fed bank supervisor has slowed decisions on regulatory policy and meant there is no internal voice on the Fed board focused on promoting tougher financial oversight favored by the Biden administration. Mr. Powell, asked last month about the Fed’s approach to financial regulation, said the central bank was “making do with the situation we have.” Without a vice chairperson of supervision, a key internal committee is now dormant, he said, and issues such as bank mergers and annual big-bank stress tests are instead considered by the full Fed board.
“When we talk about the [North Carolina] bathroom bills of 2016 and 2017 compared to now, my first response is, well, they haven’t felt that the public pressure that they would be feeling to do something is worth more than the financial benefit they have from doing nothing,” said Mandla Deskins, an advocacy manager for Take on Wall Street, an activist coalition that pushes for financial reform. “That is the calculation that I would assume banks are always making,” Deskins added, “because it’s not like they have some long-standing position against hate.”
Popular education is essential to building an equitable future — especially for base-building organizations.
“Having a Fed vice chair for supervision is crucial to a progressive agenda,” said Renita Marcellin, a senior banking policy analyst at Americans for Financial Reform, which has called for a halt on all bank mergers, more rules for cryptocurrency firms and a crackdown on the private equity industry. “There’s a lot more to do than simply repairing the damage caused by Trump regulators.”
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“The administration settled on a smart person with a background in the banking industry and in government as well as path-breaking scholarship on financial regulation,” said Carter Dougherty, a spokesperson for Americans for Financial Reform. “In less polarized times, somebody appointed by a Democratic president who worked for a previous Republican administration and for a Wall Street firm would be the kind of candidate everyone can agree on. But we’re at a moment where a candidate acceptable to Wall Street is a candidate that does the bidding of Wall Street. And that’s not acceptable to the public interest.”
“As COVID-19 swept through New Jersey’s nursing homes, residents and workers got sick and died, families struggled to get basic information about their loved ones, and caregivers were rightly terrified that they would bring the virus back to their own families. What few realized is how a secret Wall Street takeover of much of the long-term care industry has amplified the health risks to those who live and work in nursing homes” according to AFR Senior Researcher Patrick Woodall and 1199SEIU Executive Vice President Milly Silva.
The real solution to breaking the power of finance is to rebalance the recession-wracked economy. Rather than gambling on the dubious promise of more Americans gaining access to the casino, it’s time to rewrite the rules to ensure that the house doesn’t always win, writes Alexis Goldstein, senior policy analyst at AFR.
If he’s confirmed to run the SEC, there will be a lot that needs fixing, says Marcus Stanley, who worked with Gensler as a Senate staffer after the financial crisis. Stanley is now the policy director of Americans for Financial Reform. “It’s an absolutely critical regulator,” says Stanley, about the SEC. But, he says, “the SEC as an organization needs some change.” He says perhaps more than any other regulator, the SEC “continued with its pre-2008 record of deregulation, even after the financial crisis.”