Article in Society / Activism / Government
After a visit to the NY "Occupy Wall Street" protest, walking among the protesters, some observations of and discussion on the movement's diverse points and some history about the basis of those points.
 
 
 

I walked among the New York City Occupy Wall Street protesters in Zuccotti Park late afternoon on Monday, October 17, 2011. I did not smell any marijuana and the park was quite clean though there were “wall-to-wall” people camped out there. The groups involved seem to be on top of rectifying any negative behavior reports. It was interesting to watch one group preparing meals from donated food for everyone. I saw them working on some carrots, which I think were for a salad. My personal opinion is about 80% of the people there seemed serious about their points. With regard to questions about the credibility and organizational abilities of the protesters, I saw placards regarding Good Neighbor policies and codes of conduct . There were little information tables set up throughout and a designated onsite spokesperson to represent the movement if someone wanted some official information from them. I even saw a newspaper, “Occupy Wall Street Journal” last Sunday, which I thought was quite clever. The drumming was interesting with some young protesters dancing. I also had the opportunity to walk among a much smaller Occupy Wall Street protest in MacPherson Square, Washington D.C. on Saturday, October 22, 2011. There were not as many protesters in density relative to the protest in Zuccotti Park in New York City. It was relatively peaceful and quiet on a late Saturday morning there.

Not having central leadership is not a problem as in large countries as United States and China, there are always inherent tensions among large numbers and diverse groups and cultures. And problems managing the number and size of the groups should be expected as New York itself is densely and diversely populated and the United States is a big country made up of 50 states. Unlike some of the recent country revolutions we have witnessed lately with smaller populations, it is natural to expect the movement will take more time to solidify and gain momentum. Need there really be one leadership? Even without that main leadership, there still seems to be a main message underlying all the demands for jobs, equality, shelter, etc. And organizing takes time. Though the protestors may not seem well organized at the moment, and that is for the moment, and most people (in the 99%) agree with them but may believe this is the wrong way to go about getting their message across.

The protesters may be being used by various political groups but that may be part of the plan to keep their cause on our radar for elections about a week away and gain critical mass. Not a bad marketing tactic. The politicians do realize that it’s difficult to vote if you are homeless since you don’t have an address, thus district by which to be registered and represented. However, the unemployed who still have a place to live, for the moment, can still vote.

Federal bailouts with tax payer money of investment banks who caused the financial crisis have gone largely unappreciated by the saved investment bankers. We are talking about taxpayers who are suffering now because of their funding sacrifice to those very banks. The other message that has been coming out of the Occupy Wall Street protest is that we should more fairly tax the wealthy 1% as it seems they may not be paying their fair share of the national tax burden. Recently, Russell Simmons publicly stated while visiting the Occupy Wall Street protesters that the government should tax him more. A second hand story I heard was that Warren Buffet told the attendees a couple of years ago at a fundraiser that he told President Obama he should be taxed. So if some of the 1% are admitting that they should be taxed more, then there is some basis to the belief that the current tax system needs some reform.

Last weekend, I managed to watch again the HBO movie, “Too Big To Fail”, based on the award winning 2009 book by NY Times writer, Andrew Sorkin, about the behind the scenes government handling of the financial crisis. It prominently featured former Treasury Secretary and head of Goldman Sachs, Hank Paulson, trying to balance his government regulatory duties and his free market beliefs while bailing out the banks to save the American and world economy. For so many businesses and politicians who demand deregulation or less government intervention with an ideal self-regulating, self-policing free market economy, a true laissez-faire policy, supported by Benjamin Franklin, Thomas Jefferson, and indirectly by Adam Smith, would have let the banks and automobile industry fall. Alexander Hamilton, one of our founding father bankers, favored a government sponsored banking system, but then he also favored protectionist trade tariffs.

The movie opens with scenes of President Bill Clinton signing the repeal of provisions of the Glass–Steagall Act by the Gramm–Leach–Bliley Act in 1999. This effectively removed the separation that previously existed between investment banking which issued securities and commercial banks which accepted deposits. The deregulation also removed conflict of interest prohibitions between investment bankers serving as officers of commercial banks. The Banking Act of 1933, Pub. L.73-66, 48 Stat.162, enacted June 16, 1933 to prevent the banking system collapsing the first time and causing the Great Depression, is most commonly known as the Glass–Steagall Act. It was a law that established the Federal Deposit Insurance Corporation (FDIC) in the U.S. and introduced banking reforms, some of which were designed to control speculation, a financial action that does not promise safety of the initial investment along with the return on the principal sum. Speculation typically involves the lending of money for the purchase of assets, equity or debt assets, but in a manner that has not been given thorough analysis or is deemed to have low margin of safety or a significant risk of the loss of the principal investment. The term, "speculation," which is formally defined as above in Graham and Dodd's 1934 text, Security Analysis, contrasts with the term "investment," which is a financial operation that, upon thorough analysis, promises safety of principal and a satisfactory return. Complex financial instruments then began to proliferate in 10 years into what we know today and into another banking collapse and almost Depression after those legal handcuffs were removed. Once taken off, it seems corporate America forgot history's lessons as to why those handcuffs were put on to begin with. The protesters are asking that the handcuffs be put back on legally again because corporate America cannot be seem to be trusted to do the right thing.

Excerpted from the best selling book, “House of Cards: A Tale of Hubris and Wretched Excess on Wall Street," published March 10, 2009 by Doubleday: "The men running Wall Street knew full well that any liability for their risk taking -- once born by their partners -- now fell to nameless, faceless shareholders," "The holy grail of investment banking became increasing short-term profits and short-term bonuses at the expense of the long-term health of the firm and its shareholders." The author William Cohan is a former 17 year investment banker insider (with management time spent at Lazard Freres, Merrill Lynch, and JP Morgan Chase) who acknowledges the role of corporate greed, and indirectly his own role, in the industry. Cohan writes. “Years from now, when academics search for causes of the stock market crash of 2008, they will focus on the pivotal role of mortgage-backed securities. These exotic financial instruments allowed a downturn in U.S. home prices to morph into a contagion that brought down Bear Stearns a year ago this month - and more recently have brought the global banking system to its knees. ..What scholars should not miss is the role that the human element - call it greed or ignorance - played in this tragedy.” When does the “pursuit of life, liberty and happiness” become “pursuit of life, recklessness and hedonism”? To make matters worse, these practices and excesses were detrimental not only to the firm and then the infrastructure of the U.S. financial system, but also to the entire infrastructure of the world economy.

There is a lot of discussion about breach of fiduciary responsibility these days but there needs to be a closer look at this. FYI, in the U.S., investment advisors, have Series 66 (combined 63 and 65) license(s), and are regulated by the Investment Advisors Act of 1940 so have a fiduciary duty to their clients written into the statute. This means their advice must be objective and free from conflict, putting the client’s needs above their own choosing only the most appropriate investments for their clients. Typically they charge hourly fees for financial planning services and receive no commission from financial products. However, the series 7 registered representatives, agents or brokers at a traditional “broker-dealer”, are not regulated by the 1940 Act but by the Securities Exchange Act of 1934 and so not subject to the fiduciary duty standard under law, only having to apply loose customer suitability criteria. So fiduciary responsibility is not automatic nor should be expected. So we need to be better informed and ask more questions about who works in financial system supposedly for us and should not assume we are protected by any government agency or laws by our tax paper money. With regard to corporate (both investment bank and noninvestment bank) boards, directors, and officers' fiduciary responsibility to their shareholders, when is making money, in a way that could be to the firm’s own detriment, be in the best interest of the firm, much less its clients?

With regard to the points made by Occupy Wall Street protesters, there are demands for stripping corporations of right to be persons. In high school several decades ago before the days of Google and we had to physically go to the libraries and look at microfiche, I wrote a paper on the 14th Amendment, which touched on how corporations obtained the right of persons, or corporate personhood or artificial personhood. Even for a 15 year old living in New York City near the heart of the financial world, this concept still seems as mindblowing now as it did years ago when first discovered. This status allows corporations to contribute unlimited amounts for campaign financing to politicians. So how did corporations come to enjoy the same Constitutional protections that people do? Now, our founding fathers did not originally intend for this and even Thomas Jefferson unsuccessfully sought to limit the life of corporations. In his 2009 book, "Unequal Protection: The rise of Corporate Dominance and the Theft of Human Rights," author Thom Hartmann describes the situation that gave rise to Constitutional protection for corporations. It all started with a court reporter who also happened to also be a railroad president. This would have been a nice footnote in my old paper had this book been written when I wrote my paper, though it still got an A at the time.

And let’s not pin everything on the investment banks and their derivatives of subprime mortgages. The corporate greed umbrella says don’t forget the major automobile companies that came to Washington D.C. in their corporate jets asking for bailout money in December 2008, not just once but several times. We bailed out bad business strategy and management with $24.9 Billion for selling cars the market did not want.

Everyone’s point, including the former investment bankers, is if the banks, and corporate America, were doing what they were supposed to be doing, which is not knowingly passing on the risk of these complex financial instruments and result of highly paid bad business management onto the market, the tax payer, who also happens to be part of the market as a customer, would not have had to come in to save the economy and the perpetrators who almost ruined the economy, if it had not been for the taxpayer. Preventing falling domino effect bank bankruptcies, starting with Bear Stearns in March 2008 followed not long after by Lehman Brothers in September 2008, to rescue the American and the world economy was the intent of the bailout. However, since the rescue, the rescued banks have pretty much turned up their noses at the rescuers. The banks have gone largely unpenalized for taking us so close to the brink of implosion though they are still under investigation. That money came from the taxpayers. The price of that bailout has caused higher rates of unemployment and homelessness for these many diverse groups, who could have used those federal funds to help themselves get through these difficult economic times, such as for extended unemployment benefits, which seem to have been having a difficult time getting passed in Congress lately. However, the banks came first because their fall, even in their incompetence, could have lead to a meltdown of the economy because of the other core services they also provide to the market. The diversity of the groups and their messages is the perceived disorganization we see but is a natural and expected consequence of the many groups that have been impacted by the financial crisis. And that resentfulness of that lack of gratitude and desire to give back to the very community that has helped the banks, I think that sentiment, or lack thereof, in their reactions to help others when they have been helped by others, is basically what the protesters and the 99% are expressing. Somewhere corporate America snubbed Aristotle’s Golden Rule – “Do unto others as you would have them do unto you.” I suppose if the tax payer had snubbed the investment banks, there would a reason for the lack of the gratitude for many being able to keep their banking jobs. It seems the banks have snubbed the tax payer and the protesters represent some of the impacted tax payers.

Gas powered heaters and generators were removed by NY fire department and police the Friday before Halloween on grounds that they were safety hazards. Was power was cut off to the Occupy Wall Street protesters knowing full well the rare October Halloween weekend nor-easter snowstorm was to hit NY the next day? Interestingly enough, the protesters switched to manually driven generators hooked up to a stationary bicycle. They have already raised $454,000 from donations. If the protesters can last through the harsh New York City winter without any major casualties, I believe the movement will have gained more traction as time will be on their side. With more pending layoffs, I predict they may be joined by new 99% members, the formerly employed Bank of America, Whirlpool and Clear Channel staff. Once their unemployment benefits run out and Congress does not approve another round as this recession is not abating any time soon, they’ll come to understand better. Will you wait until you lose your job in corporate America to confirm your 99% status? In community, are we our brothers’ keepers? What happened to Cain and Abel when we believe we are not? It’s awfully cold and/or snowy and rainy out there in Zuccotti Park this Halloween weekend.

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Dr. Pearl Chin, PhD, MBA
Business and nonprofit management consultant, business and social entrepreneur, nonprofit executive, strategist, change agent, innovator, ed

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