You know what they say about birds of a feather. So I guess it was only natural that I would meet up with Nathan Feldman after the Federal Bureau of Prisons moved us from our respective minimum security prisons to a Manhattan halfway house. We both had several months left on the sentences they hung on us for securities fraud that swept our Wall Street careers down the drain.
I knew Nathan by reputation and recognized him in the halfway house because we had actually met once years ago at a Wall Street charity function for the homeless. So at the first opportunity, I walked up to him in the cafeteria with my right hand outstretched.
“Nathan,” I said.
“I think so. At least I was when I got up this morning.”
“Hi, I don’t know if you remember me, but I’m Tony Leonardo. And everything they say about me is true.”
“Oh yeah,” said Nathan. “I remember you. But only half the things they say about me are true. The question is which half?”
“I’m glad to see prison hasn’t dulled your well-known wit,” I said.
We sat across from each other at a cafeteria table. Nathan took several folded sheets of paper from his inside pocket and laid them out before me. One was a multi-colored chart showing the tremendous growth of the financial sector in the United States, with annotations handwritten here and there in red.
“Here, take a look at this,” he said.
The chart clearly showed that in the 1950s the finance and insurance industries accounted for about 3 percent of U.S. Gross Domestic Product. By 1970 it was up to 4.2 percent. But by 2012, even after the 2008 financial apocalypse, they represented 6.6 percent.
“That’s a great chart, Nathan,” I said. “Where did you get it?”
“Put it together myself,” he said “Here take a look at this other chart Tony.”
This one showed that the finance sector had grown disproportionately more profitable. In 1950, the financial sector claimed around 8 percent of U.S. corporate profits; now, it’s about 30 percent. It has displaced manufacturing as the biggest profit center in the economy. For sure, the money made from making things pales by comparison with the amount of money made from moving paper around.
You could also reasonably assume that just as profits shifted from labor-intensive businesses, such as manufacturing to the comparatively low-employment finance sector, wealth became concentrated in fewer hands, contributing big time to the huge rise of inequality that started in the mid-1970s.
“Actually, Tony,” Nathan said, “these figures understate how much finance dominates the economy because they don’t include the nonfinancial firms that have finance businesses. For example, GE Capital at one time generated over 40 percent of General Electric’s earnings.”
“Is it any wonder,” I said, “that our former industry gets favored treatment in Washington?”
“The rich are always listened to more than the poor and that’s especially true with how the finance sector dominates the economy, government, and society,” said Nathan. “Just think about the millions the industry spends on lobbyists and how many millions they donate to political campaigns.”
“And then there are all the senior government officials who have spent most of their careers in finance,” I said. “They have a mindset that is more closely attuned to Wall Street than Main Street.”
“For sure, just think about the number of Goldman Sachs and Citigroup people who navigate the revolving door, moving in and out of high government positions.”
“Well, time’s up, Nathan,” I said. “I have to go visit with the staff psychologist to take another one of these personality tests. All part of the prison bureau’s inmate rehab program, designed to help us return to society as decent citizens, whatever that means.” I laughed. “Let’s talk again soon.”
originally published: January 31, 2015
