Vol. 74/No. 6      February 15, 2010

Noting that one in five U.S. males between the ages of 25 and 54 are unemployed, Summers said those numbers might improve to one in seven or eight as the “recovery” proceeds.

Summers was the highest-ranking U.S. official to attend the forum. He holds the distinction of being one of the main architects of the Financial Services Modernization Act, signed into law by former president William Clinton in 1999. That legislation repealed the Glass-Steagall Act of 1933, which established a legal separation between commercial banks and insurance companies, stock brokerages, and investment banks.

Many bank executives at Davos were clearly not experiencing a “human recession” in their own lives. Bonuses at the five largest U.S. investment firms soared 30 percent to $36 billion in 2009, according to Bloomberg News, “and the Dow Jones Industrial Average climbed to a record.”

“We shouldn’t pour cold water on everything,” Deutsche Bank CEO Josef Ackermann told Bloomberg. “We, the eight or nine players in global investment banking, have a very good future.”

The “human recession” was the more apparent future for several European countries that sent representatives to Davos. Spain has 19.4 percent official unemployment, the highest in Western Europe. Greece faces a 12.7 percent budget deficit and the possibility of defaulting on its debts, even after the firing of thousands of government workers to cut costs. Latvia, despite its bailout by the International Monetary Fund, has 22.3 percent official unemployment.

Confronting a continued contraction of production on a global scale, the capitalists are once again seeking to increase their rate of profit by expanding their trade in debt, the same course that led in 2008 to the collapse of Bear Stearns and other major investment houses in the United States.

Bloomberg commented January 22 that “investor appetite for risk has never been greater. Several measures show perception of risk is at near historic lows… . The amount of debt used to finance European buyouts rose to 8.7 times earnings in the third quarter, the most ever.” U.S. hedge funds are “the most leveraged since 1998.”

Financial executives at Davos debated Obama’s latest move to respond to popular outrage over the profits banks are reeling in while millions remain jobless and/or foreclosed. Obama had announced January 21 what he claimed would be “common-sense” reforms of the banking system. The proposal is known as the Volcker Rule, named after Paul Volcker, former chair of the Federal Reserve. It calls for prohibiting commercial banks from owning or investing in hedge funds and limiting the use of federally insured deposit funds for “speculative” and “risky” investments, such as mortgage-backed securities.

“They can go ahead and impose the rule on Friday, and I can assure you that by Monday, we’ll find a way around it,” a senior banker at Davos told the New York Times.
 
 
Related articles:
Gov’t job proposals offer little for workers
Fight for a workers recovery  
 
 
Front page (for this issue) | Home | Text-version home