The U.S. financial crisis of 2007-2009, also known as the Great Recession, is generally blamed on Wall Street. It's a simple enough narrative, and largely accurate, except that many people don't know what Wall Street actually means, or how powerful it is.
We're here to help in today's Seeker Daily dispatch. Simply put, Wall Street refers to the American banking industry. The name comes from the actual Wall Street in New York City, home to the world's largest financial markets -- NASDAQ and the New York Stock Exchange.
U.S. financial institutions hold roughly $15 trillion dollars in assets, half of which is controlled by just five banks. For many reform-minded observers, those are alarming figures and go a long way toward explaining the power of Wall Street.
How does Wall Street retain its wealth and power? A 2009 study by the Center for Economic and Policy Research found that banking deregulation in the 1970s and 1980s was essentially driven by the banks themselves, by way of a massive and highly coordinated lobbying effort.
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The idea was that deregulation would lead to increasing Wall Street profits, which would then trickle down to Main Street. But instead, banks and lenders used financial deregulation to take on riskier loans in the pursuit of still greater profits.
Risky mortgage loans caused the housing market to collapse under the weight of bad debt, which staggered the U.S. economy, which in turn took down financial markets around the world. You'd need an economics Ph.D. or two to really dig into it, but that's the gist.
So, yes -- Wall Street is pretty powerful. In fact, in the aftermath of the crisis, major American banks were famously deemed too big to fail and bailed out with roughly $16 trillion in public money.
Neat trick, that. If you can manage to choke down class rage for a second, learn more with the Seeker Daily dispatch, What's So Bad About Big Banks?
-- Glenn McDonald
The Guardian: Heist of the century: Wall Street's role in the financial crisis
Forbes: Five Biggest U.S. Banks Control Nearly Half Industry's $15 Trillion In Assets
Reuters: Goldman's share of AIG bailout money draws fire
FXCM Market Insights: New York Stock Exchange (NYSE)