HuffingtonPost.com,
November 5, 2011
Occupy
Wall Street From a Human Rights Lens
By Radhika
Balakrishnan and James Heintz
Occupy
Wall Street has hit a chord with people, underscoring what many
see as the primary problem of the U.S. economy -- the dominance
of financial interests. A recent poll discovered that 43 percent
of people agree with the views of the Occupy Wall Street movement,
and only 27 percent disagree. Wall Street symbolizes all global
financial institutions and we shouldn't forget that it was the
behavior of these institutions which caused the financial meltdown
and economic collapse in the first place. The financial collapse
that first engulfed the U.S. economy in 2008 has left in its wake
a record number of jobless, increasing poverty rates, and widespread
loss of homes.
We are told
that we are in a recovery period, with profits expanding rapidly
and production beginning to move forward. The financial sector
is back on its feet, with Citi Group recently announcing that
profits grew 74 percent over the past year. But now, over three
years since the crisis began, the term 'recovery' feels like a
bad joke.
Last week
we participated in a teach-in at Occupy Wall Street, in which
we linked the problems caused by the financial sector with a broader
concern over human rights in the U.S. Economic and social rights
include many of the issues that people care about most these days:
the right to a job; the right to housing; the right to education;
and the right to an adequate standard of living. The human rights
framework outlines a range of principles to guide government actions,
and has powerful implications for the behavior of the financial
sector. At the teach-in, we focused on two human rights principles:
(i) the obligation to protect; and (ii) the concept of maximum
available resources.
The obligation
to protect requires governments to prevent violations of economic
and social rights by the actions of third parties. Governments
are also obligated to use the 'maximum available resources'
to realize economic and social rights.
The obligation
to protect has important implications for financial regulation.
It was the actions of third parties -- 
the
financial institutions -- which undermined the economic and social
rights of people living in the U.S. Fundamental changes in financial
regulations over the past 30+ years represent a failure of the
U.S. government to take steps to prevent financial institutions
from taking actions which put people's jobs, homes, and economic
security in jeopardy. It is not that there was simply deregulation
of the U.S economy, in reality there has been a re-regulatory
process that has been biased toward the interest of banks rather
than workers and families.
The process
began back in 1980 with the Depository Institutions Deregulation
and Monetary Control Act which removed a number of existing regulations
on the banking sector. These reforms eventually fed into the savings
and loan debacle in the second half of the 1980s. Rather than
learning from this disaster, the government moved forward with
more reforms of the same type. The Gramm-Leach Bliley Act (1999)
repealed many of the regulatory protections put in place after
the Great Depression under the Glass Steagall Act (1933). For
example, the Gramm-Leach Bliley Act paved the way for massive
consolidation in the financial industry, creating the huge institutions
behind the current crisis. When the crisis broke, these consolidated
institutions had to be bailed out because, we are told, they are
simply too big to fail. The recent Dodd-Frank bill is a step in
the right direction in terms of the focus and need for different
regulation, and is a break from the recent past. However, while
it gives regulators a stronger mandate, it is too early to tell
whether the new provisions will be aggressive enough, or effective,
enough to prevent another disaster.
The bailouts
point towards a second human rights principle, the idea that government
should use the maximum available resources to support the realization
of economic and social rights. If the bailouts were so essential
to the functioning of the U.S. economy, why aren't more people
experiencing the benefits? Some of the bailout programs were 'on
budget' in the sense that they were funded through the federal
budget. The Troubled Asset Relief Program, or TARP, introduced
in 2008, was a bailout funded through government spending. However,
much of the support to the financial sector did not come from
the budget, but instead was orchestrated by the Federal Reserve.
With the financial meltdown, the Federal Reserve took unprecedented
steps to support the financial sector.
The Federal
Reserve (or Fed) is the central bank of the U.S. and therefore
plays an important role in regulating and influencing the economy.
For example, the Federal Reserve can take steps to try to reduce
unemployment. However, the Fed can also adopt policies that primarily
benefit the financial sector. It is not the existence of the Fed,
a government body, that creates the problems we're now experiencing
-- it is the process whereby policy decisions are made and priorities
are set. Specifically, the Fed helped out by buying up trillions
of dollars of questionable corporate assets that were causing
problems. This was part of a more general strategy called 'quantitative
easing'. When the Fed buys up corporate assets, it exchanges these
assets for money -- in effect, the Fed injects money into the
economy through its policy of quantitative easing. This injection
of money should help get the economy going again, by encouraging
banks to lend, businesses to invest, and people to buy goods and
services.
However, few
ordinary people have benefited from this strategy. What happened
to all that money? The banks are holding on to a large share of
it. In the second quarter of 2011 (April to June), U.S. banks
were hoarding $1.6 trillion that they held as deposits at the
Fed -- effectively preventing these resources from having any
positive impact on job creation and the broader economy. It is
important to see these deposits in an historic context (see graph).
The current
$1.6 trillion represents a kind of insurance policy for the banks.
If things start going bad again, the banks already have a stockpile
of funds that help protect their interests. In addition, they
receive interest on this money.
It is important
to keep in mind that the Federal Reserve is a government body.
When the Fed bails out banks by buying bad assets (and these bad
assets were the outcome of the banks' own decisions -- e.g. investing
in assets backed by sub-prime mortgages), it takes on these risks
on behalf of the American people. Although the U.S. population
has taken on these risks, the vast majority of people do not have
access to a $1.6 trillion cushion to protect themselves in case
the economy heads south again.
This brings
us back to the question of maximum available resources. There
is a stockpile of $1.6 trillion sitting idle in accounts at the
Federal Reserve -- the outcome of decisions made by public institutions.
This money is not being used to support the right to a job, or
the right to hold on to a home. Much more could be done. This
money, given to the banks to help jump start the economy, is money
that the banks are sitting on. There needs to be concerted effort
on the part of the government to fulfill its obligation to protect
by making sure there are regulations in place to benefit people
rather than banks. In addition, government's obligation to use
its maximum available resources for the facilitation of economic
and social rights means that resources need to be allocated for
jobs, housing, health care, education, etc.; not to be held by
banks.
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