Wall Street Is On Fire Again

The folks on Wall Street know how to make money even after showing the world that they can also lose money. Thanks to the Federal Reserve, Federal Government, and the U.S. Taxpayer, Wall Street has been able to socialize losses and privatize profits.

Wall Strret and Big banks have received the bulk of the bailout money. A short while ago, people were wondering if the end to Wall Street as we know was near. Firms like Goldman Sachs are now preparing to pay bonuses of approximately 23 billion at the end of the year. Other firms are showing profits that are bigger than ever.

Charles Hugh Smith reports that The 1970s saw the first beginnings of a loosening of financial regulations and the growth of credit and financial "innovations," such as securitization and derivatives. Capital increasingly fled real production for finance, which became the key profit-center of corporate America. GM didn't make money manufacturing autos; they made money selling loans to buy their cars. General Electric made more with its GECC finance arm than it did selling light bulbs and generators.

As a result, where finance and banking once generated a mere six percent of total U.S. corporate profits, by the height of the housing bubble in 2006 it was churning out 45 percent of all corporate profits. Indeed, U.S. "financial services and innovations" were the most heralded exports of the nation.

45 percent makes sense when one tries to understand why big banks and the top Wall Street firms are considered too big to fail.