November 15, 2011

What Have We Learned From the Occupy Movement?

Garett Jones

Senior Research Fellow
Summary

Occupy Wall Street supporters are right in thinking that the government and banks are interconnected in a way that is bad both for democracy and for capitalism.

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Occupy Wall Street supporters are right in thinking that the government and banks are interconnected in a way that is bad both for democracy and for capitalism.

Wall Street has an enormous amount of political influence, and the Occupy Movement is right to be mad not only at Wall Street but also the politicians that allow it to have this power. These banks know that if they create a crisis, they will get more money from the government, not less.

However, to think that this problem is a result of capitalism is wrong. This problem is a result of crony capitalism—a system of private gains and socialized losses. A  good example of this is TARP.

The U.S. government did not need to bail out the banks during the financial crisis. And even if it had bailed them out, there was no need to bail the banks out at 100 cents on the dollar.  Regardless of the political pressure or public panic, bank investors could have handled substantial losses and managed them through a process called “speed bankruptcy.”  Wall Street didn't need all the favors it received.