Last week, Federal Reserve Chairman Jerome Powell quietly said something outrageous. Asked whether the biggest banks in the country would continue making cash payments to their shareholders amid the worst economic breakdown in recorded history, Powell said yes.
“That’s a perfectly normal thing in our capitalist system,” he told David Wessell, a former Wall Street Journal reporter turned monetary policy guru at the nonpartisan Brookings Institution.
The world stands at the brink of financial catastrophe. Congress has passed a massive corporate bailout, and Powell himself has initiated the most aggressive financial rescue operation ever contemplated by the American central bank. These things do not happen when the banking system is hunky dory.
And yet Powell continues to let the biggest banks in the country cut checks to their shareholders ― aka “rich people,” in the parlance of our times ― as a matter of routine. Almost half of all dividend income flows to the top 1% of income-earning households, while less than 8% of households in the bottom 60% earn any dividend income at all. And when the terms of the emergency coronavirus legislation were being debated in Congress last month, nobody lifted a finger to halt this miscarriage of capital ― not Senate Majority Leader Mitch McConnell (R-Ky.), not House Speaker Nancy Pelosi (D-Calif.), not even populist firebrands Sens. Elizabeth Warren (D-Mass.) or Bernie Sanders (I-Vt.).
Back in The Bad Old Days of the last financial crisis, regulators allowed the 19 largest banks to pass out $80 billion in dividends to their shareholders as the banking system was collapsing. The Fed even allowed AIG to pay a dividend to shareholders after it was bailed out by the Fed.
Of course, $80 billion wouldn’t have saved the financial system. But it would have helped. More importantly, there is something fundamentally rotten about a financial order in which top government officials allow the super rich to keep cashing in as working people are thrown to the bread lines.
And it’s not just bank shareholders who are going to feast on cash payouts while millions of Americans find themselves unemployed. The restrictions on dividend payouts to shareholders ― even for companies that receive a bailout from the coronavirus bill ― only apply to airlines and “national-security-critical” businesses. A lot of firms are about to lay off a bunch of workers to cut costs while sending checks to their shareholders. Congress and the Trump administration are letting it happen.
We live in a democracy, not a mathematical equation. Who does your government fight for ― you, or the super rich? Today, as unemployment has skyrocketed to the highest level since the Great Depression almost overnight, the top economic regulator in America is protecting the rights of big banks to keep funneling cash to the wealthiest people in the country.
Congress has done nothing to tie his hands. Under the terms of the recent coronavirus rescue package, Powell can do almost anything he wants with a $4.5 trillion allocation blessed by literally every single senator who showed up to vote. In the House, many didn’t even bother to say aye or nay ― Pelosi blocked efforts to approve remote voting, ensuring that McConnell’s Republican-controlled Senate would have the upper-hand in legislative talks. Rank-and-file members of the Democratic-controlled House had almost no influence over the final package, at Pelosi’s dictat.
Big bank dividends aren’t a distraction from the public health crisis killing our friends and neighbors. They’re one example of the way our leaders ― Democrat, Republican and technocrat ― are using this crisis to bend the world toward a future of deeper inequality and diminished political power for working people. It is and ought only to be understood as an outrage.
Zach Carter is the author of “The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes,” available now for pre-order from Random House.