During the global financial crisis (GFC, 2007–2009), Lloyd Blankfein, CEO of Goldman Sachs, famously said that it was unfair that people were so mad at him and other bankers for crashing the economy because, contrary to common belief, they were doing “God’s work.”1
God’s work? Maybe so. But they were certainly not doing work for the economy, the taxpayers, or the people. Rather, it turns out, we were all working for them.
However preposterous Blankfein’s claim was, he went on to argue something that is contained in almost every Money and Banking textbook and that is constantly repeated by economists, politicians, and bankers: “We’re very important. We [bankers] help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. We have a social purpose.”
In other words: “Bankers are essential workers.”
But the people are not buying it. When they clapped every night on their balconies at 7 p.m. or made signs or sent out heartfelt messages thanking “our essential workers,”they mentioned health care workers, first responders, teachers, grocery store workers, delivery people, and farmers, among others. But bankers?
Still, the hard truth is that bankers make themselves “essential” by inserting themselves into the heart of the economy. This becomes most obvious during economic crises. In the run-up to periodic financial meltdowns, bankers’ reach, wealth, and power means they can direct the nation’s credit and, more important, its human and natural resources in socially perverse and destructive ways. Then, when their reckless actions get out of hand, they threaten all of us with economic destruction, unless we prop them up and bail them out. In this way, bankers and financiers make themselves essential workers the same way the local shake-down artist extracts protection money: pay up, or watch your store burn to the ground.
Believe it or not, the problem gets even worse — policymakers help to make the bankers “essential workers.” In the current economic crisis, for example, the Federal Reserve (Fed) and the US Treasury made bankers essential workers to channel funds to small businesses and households and manage the Fed’s securities market operations. These private banks stand to earn more than $17 billion in fees from this work, though they appear poorly positioned to handle this efficiently and quickly.2 For instance, the $1.7 trillion asset management firm BlackRock has been commissioned by the Fed to manage several of its new bailout funds.3 Bankers stand to gain millions in fees for an activity that could be carried out by the Fed itself just as easily, more cheaply, and without conflict of interest.
Thus, bankers have made themselves essential workers the way that most rent grabbers and middlemen do it: through political power, manipulation, and blocking the competition. These bankers’ biggest fear is that public banking would provide this effective competition, nullifying their claims to be essential and therefore worthy of the public’s largesse.