Low-income Americans, particularly blacks and Latinos, face tremendous obstacles as they struggle to put aside money for investing. According to a recent Institute for Policy Studies report, the billionaires on the Forbes 400 list now own about as much wealth as the entire African-American population plus more than a third of the US Latino population combined. Even if living-wage campaigns and other initiatives succeed in raising wages and making investment possible, ordinary Americans could still find their hard-earned savings wiped out by another financial crisis.
The Dodd-Frank financial-reform act took modest steps toward reforming Wall Street. But the too-big-to-fail banks are even bigger today than they were before the 2008 crisis, a disaster that wiped out $19 trillion in household wealth. Megabanks continue to engage in virtually unregulated, high-risk speculation propped up by public subsidies and guarantees. This speculation has no connection to real economic activity, but it affects Main Street all the same, draining earnings from everyday investors and destabilizing markets. Unless more is done to rein in the Wall Street casino, Americans could once again end up on the hook for bank bailouts while poor and middle-class households suffer massive losses.
A pending bipartisan bill, the 21st Century Glass-Steagall Act, would dramatically reduce systemic risk by restoring the historic barrier between commercial and investment banking. But galvanizing public support to overcome Wall Street’s opposition will be difficult.