Three months after President Trump signed the Republican tax law, how’s it working out for you? It all depends on whether you work on Wall Street—which got $1 trillion in tax breaks for big business and the wealthy—or in Wisconsin, where working people are facing plant closings and pink slips.
Two lawmakers from Wisconsin stand on two sides of the debate. Republican House Speaker Paul Ryan insists, “This gets us better wages, bigger paychecks.” But Democratic Senator Tammy Baldwin is cracking down on stock buybacks which swell CEOs’ stock portfolios while squeezing workers’ jobs and paychecks.
Buybacks, No Bonuses. Respected financial analysts agree that Wall Street is getting the gold mine, while workers are getting the shaft. The metrics may differ, but the message is the same:
- Bloomberg found that shareholders are enjoying 60 percent of the tax-cut gains, while workers are getting only 15 percent.
- Morgan Stanley reports that 43 percent of their tax savings are going to stock buybacks and dividends, while only 13 percent to workers’ raises, bonuses, and benefits.
- In an analysis of 121 Russell 1,000 companies, Just Capital found that shareholders are getting 57 percent of tax savings, while 20 percent is going to job creation and 6 percent to current workers.
- In fact, share buybacks are averaging $4.8 billion a day this year.
Kleenex Maker Wipes Out Jobs. Racking up $3.3 billion in profits last year and bragging that “we returned $2.3 billion to shareholders through dividends and share repurchases,” Kimberly-Clark is laying off as many as 5,500 workers, while closing or selling 10 plants globally. Many of these employees live near and work at the company’s plant in Fox Crossing, Wisconsin.
No More Buyouts and Broken Lives. Concerned about human tragedies like these layoffs, Senator Baldwin has introduced a bill to prohibit companies from buying back their shares on the open market.
- Co-sponsored with Democratic Senators Elizabeth Warren of Massachusetts and Brian Schatz of Hawaii, the bill would also repeal a 1982 rule by the Securities and Exchange Commission allowing companies to buy back immense amounts of their own stock.
If you’re wondering why Americans are angry at Wall Street and Washington, just look at Bank of America.
- Bank of America is pocketing a $2.7 billion windfall from the new tax law that the Republican Congress passed and President Trump signed. The mega-bank just posted $2.4 billion in profits for the final quarter of 2017.
- Instead of saying “Thank you!” to its taxpaying customers, it’s giving them the back of its hand. Calling a halt to its free online checking accounts—a financial lifeline for low-income customers—it will charge fees to account holders with low bank balances.
- The new fees could swell the ranks of 9.6 million Americans without bank accounts, many of whom have to use expensive check-cashing services or, worse yet, exploitative payday lenders.
Fortunately, low-cost checking is still available from online banks, credit unions and the worker-friendly Amalgamated Bank.
You may have seen the storefronts in low-income communities, with signs saying, “Checks Cashed.”
These signs don’t say that these “payday lenders” charge annual interest rates of 200 percent or more, tapping janitors, hospital orderlies, homecare aides and other low-wage workers in endless cycles of debt. Nor do they admit that these seemingly small businesses are often fronting for big banks.
Earlier this month, an Obama-era rule was set to kick in, protecting poor customers against exorbitant fees for “short-term loans” that suck them into repaying the interest over and over again. But, on that very day, Mick Mulvaney, President Trump’s new head of the Consumer Financial Protection Bureau, canceled the long-awaited rule.
In related actions, he has also announced that the CFPB was dropping its lawsuit against a group of payday lenders charging interest rates of almost 950 percent, while also halting its investigation of the subprime lender World Finance, which charges annual interest rates that could exceed 200 percent.
A former South Carolina congressman, Mulvaney is turning the CFPB—founded in the aftermath of the banking crisis of 2008—from a watchdog for consumers to a lapdog of the bankers. Why is Mulvaney supporting Wall Street over Main Street? One reason just might be that World Finance, which is headquartered in South Carolina, contributed $4,500 to his campaign fund.
The big banks are raking in record profits, pocketing new tax bonanzas and laying off their own employees. Why pay banks more than we have to? Some commonsense, money-saving tips (the kind we often know but don’t always follow) from Today’s informative website.
- Ditch Those Fees: Find a free checking account, no strings attached. In 2017, fees on noninterest-bearing checking accounts average $5.84 a month. With a free checking account, you’ll save about $70 a year.
- Avoid ATM Surcharges: “Out-of-network” ATM withdrawals cost an average of $4.69, according to the 2017 Bankrate checking account survey. Even if you only do this once a month, you’ll save more than $40 a year if you use only your own bank’s ATMs.
- No More Overdrafts: Overdraft fees for making purchases greater than your bank balance set new records last year, averaging $33.38. Make sure it doesn’t happen to you this year.
Which industry is raking in billions of dollars from the recent tax law? The major banks.
And who’s laying off tens of thousands of workers? The major banks.
- $10 Billion Windfall: With the new tax law ladling out more than $1 trillion in corporate tax breaks, the nation’s five largest banks will rack up an additional $10 billion in profits in spite of what Bloomberg News calls “lousy trading results.” Think they are keeping President Trump’s promise that, when corporations are flush with cash, they’ll create new jobs? Think again.
- Mass Layoffs Announced: At the end of 2017, as the tax cuts sailed through Congress, the six largest banks, including Citigroup and Wells Fargo, wiped out about 8,000 jobs. Despite the economic recovery, these banks have eliminated almost 150,000 jobs since 2011.
- Rewarding Shareholders: Bank executives have made it clear that their priorities are increasing dividends and stock repurchases and investing in new technologies, some of which will replace existing employees. For instance, Citigroup said it will pay out $60 billion to its investors.
With wages flatlining in recent years – and lenders pushing out cards to consumers with below-average credit scores – Americans now have the highest credit card-debt in history.
And that total – about $1.021 trillion – was computed before the recent holiday season!
How can working Americans dig ourselves out from this mountain of often high-interest debt and avoid being buried under new charges? Financial experts offer these suggestions:
And check out union friendly financial services, such as Union Plus and Amalgamated Bank.
Working Americans shouldn’t blame themselves for the financial squeeze that the big banks created. But, through smart financial planning, we can keep more cash in our wallets.
When big banks swindle you, you won’t be able to join with other consumers to sue them. That’s because President Trump and his allies weighed in for Wall Street against working Americans.
Late at night on October 24, the Senate killed a rule that would have empowered consumers to file “class action” lawsuits against banks that bilk them out of their hard-earned money. Joining all but two Republicans to side with Wall Street, Vice President Pence broke a 50-50 tie vote. The Republican-controlled House had already rejected the rule, which had been proposed by the Consumer Financial Protection Bureau but never went into effect.
This means consumers can be compelled to settle their disputes on the banks’ home turf: out of court in arbitration procedures dominated by corporate lawyers. These “mandatory arbitration clauses” are hidden in small type and legal jargon in the lengthy contracts for checking accounts, credit cards and student loans.
Emboldened by this victory, the Trump administration is trying to make it more difficult for consumers to sue other corporations. For instance, Education Secretary Betsy DeVos is working to keep “mandatory arbitration” clauses in students’ contracts with the scandal-ridden for-profit colleges.
Hang on to your wallets.