#corporations funnel absurd amounts of money into marketing

[joey-wheeler-official]

Who started the “corporate account run by an unpaid intern” myth and why did we all fall for it?

[theinvinciblenoob]

Amazon has confirmed that it will open two massive new offices in New York City and Crystal City, Va., to complement its already massive headquarters in Seattle. And the verdict on the company’s decision is disgust.

Amazon played everyone involved in the process: the governments that pandered to it and the media that covered it (including us). Now it looks like the residents of these communities that will have to live with their new corporate neighbor are going to be left to pay for it.

In its search for a new office location or two, Amazon perverted the standard request-for-proposal process designed to provide transparency into how governments spend money on big projects. Either by design or happenstance, Amazon shat all over the process and the inherent transparency by which civic decisions are made.

That Amazon felt comfortable enough to flip the script and instead have cities bid for the largesse of a corporation was galling enough. The fact that cities across America actually did the company’s bidding was proof of just how feckless, toothless, and seemingly powerless government at every level in this country has become.

There couldn’t be a more perfect analogy for the return of the corporation as the central organizing principle in American life. And there couldn’t be a more perfect corporation to embody this than Amazon. City governments swooned, falling over themselves to offer even larger and more absurd concessions to Jeff Bezos’s behemoth.

The city of Stonecrest, Ga., offered to rename the town and make Jeff Bezos its permanent mayor should the company select it as the site for the new office “HQ2.” Birmingham, Ala., plastered fake Amazon boxes across the city and created a marketing campaign called “Bring A to B” to woo the “everything store.” Albany, N.Y.’s take was so pathos-inducing that it was eviscerated by The Onion.

the amazon cuomo method pic.twitter.com/ZU5Ds9lxmZ

— maya kosoff (@mekosoff) November 13, 2018

There was some hope, early in the process, that Amazon would indeed settle on some location in the American heartland and serve as another catalyst for growth for regions that are beginning to climb out of the economic holes dug in the financial crisis of a decade ago.

Perhaps one of the Midwestern metropolises that are already seeing a resurgence would enjoy an even bigger jolt from Amazon bestowing 50,000 new jobs on a region that could use it.

Columbus, Ohio, has a burgeoning technology scene and is enjoying incredible growth. Denver and Boulder, Colo., are also reaping the fruit of a technology and startup renaissance in the state. Indeed, across the country hope sprung eternal that Bezos and Amazon would bring a torrent of job opportunities and investment to places that could be rejuvenated to make America great again.

Unfortunately it was all just a year of wishful, wistful, magical thinking.

There’s no doubt that Amazon, with its $797.6 billion market capitalization, is the unnecessary winner in all of this. Cities opened their books to the company to prove their viability as a second home for the retailing giant. In return, Amazon got reams of data on urban and exurban centers that it could use to develop the next wave of its white collar office space, and over $2 billion worth of tax breaks from the cities that it would eventually call home for its new offices. 

The burden should not be on the 99 percent to prove we are worthy of the 1 percent’s presence in our communities, but rather on Amazon to prove it would be a responsible corporate neighbor. Corporate responsibility should take precedence over corporate welfare.

— Sen. Mike Gianaris (@SenGianaris) November 11, 2018

The big swindle?

New York City, which is offering up the bulk of the new tax incentives to Amazon, will be spending roughly $1.5 billion for the privilege of having Amazon strain its already overtaxed infrastructure with 25,000 new employees. Those tax breaks will cover things like the construction of a helipad for the new offices so executives won’t have to worry about the failing city subway system.

The city is giving Amazon its refundable tax credit through New York State’s Excelsior Program. That up-to-$1.2 billion grant was calculated as a percentage of the salaries Amazon expects to pay employees over the next 10 years and amounts to $48,000 per employee Amazon brings in.

New York also gave an additional cash grant from the Empire State Development Corp. of $325 million based on the square footage of buildings occupied over the next decade. The incentives are set to roll out over the 10-year timeframe based on the incremental jobs Amazon creates each year and as it reaches building occupancy targets.

The carrot that Amazon has dangled in front of New York (and Long Island City more specifically) is more than 25,000 full-time jobs and a $2.5 billion in investment from Amazon in 4 million square feet of office space (which could expand up to 8 million). Amazon estimates that tax revenue will bring in $10 billion over the next 20 years through investment and job creation with the jobs expected to pay out an average wage of $150,000.

With all of this, the devil is in the details. The company says New York is spending $48,000 in incentives for employees that will make $150,000 on average, while the median salary for an Amazon employee in 2017 was $28,446 (excluding Jeff Bezos who took in $1,681,840).

Advocates who follow the commercial development space aren’t so sure. “We are suspicious of the way the whole incentives news has been issued today,” said Greg LeRoy, executive director of the development subsidy watchdog group, GoodJobsFirst. “It’s very odd that the company itself put in the information itself. It looks to us that Amazon is trying to cook the cost-benefit books.”

LeRoy says that by checking the numbers that Amazon says New York will be spending, the total is closer to $61,000 per job, not $48,000. Then Amazon rushes out with the $150,000 average salary, but the numbers aren’t comparable. The tax bill on a $150,000 salary for the state of New York is roughly 31 percent. “They’re going to pay whatever the state rate is, which won’t begin to offset the $61,000,” says LeRoy. “If the deal succeeds, there’s going to be new public sector costs. And if Amazon isn’t paying its fair share then everyone else gets stuck with paying higher taxes or getting lousier services or a little bit of both.”

There’s another problem with the deal that Amazon struck in New York, according to LeRoy. Through the agreement, Amazon has said it will build some new infrastructure around Long Island City through something called a Payment In Lieu Of Tax program. That’s when a portion of Amazon’s property taxes are funneled directly into projects that are located in the Long Island City community. In its announcement, the company said that it would donate space on its campus for a tech startup incubator and for use by artists and industrial businesses, and that it will donate a site for a new primary or intermediary public school. The company will also invest in infrastructure improvements and new green spaces — all paid for by the PILOT program.

LeRoy calls it another subsidy.

As housing prices climb in Queens for rentals, cooperatives and condominiums, the neighborhood’s existing residents will likely be unable to afford the higher property prices. They’ll be moved out and essentially Amazon will be paying for infrastructure upgrades likely to be enjoyed solely by the company’s employees — again, at the expense of the broader tax base.

“Instead of going to development fund of the city instead it will go back to the PILOT district, diverting money to a small part of the city,” says LeRoy. “[Amazon is] getting more than $2 billion of subsidies for white collar workers to be part of the 2 percent.”

However, Amazon’s new offices will undoubtedly create new wealth for the cities that they settle in. An article in The Denver Post described how Seattle’s coffers had been enriched by becoming the epicenter of all things Amazon.

Amazon estimates its direct spending boosted Seattle’s economy by $38 billion from 2010 to 2016. Hotels are thriving thanks to visits by friends and family of Amazon workers, as well as by Amazon employees from elsewhere. The Downtown Seattle Association estimates $5 billion in construction activity was underway during the summer, with more than 30,000 residential units in the works.

If Amazon’s figures are correct, then New York City, and the Washington metropolitan area, are set to receive a windfall (with Nashville, Tenn., also looking to make out pretty well in the deal).

It’s all about transparency

The question is less about whether Amazon’s decision to site its satellite offices in certain cities will be a boon to those cities. Instead, it’s whether the residents who already live there should be able to have a say in whether or not Amazon can come in and reshape their cities in radical ways.

De Blasio says it's ok that he and the governor are bypassing New York City's onerous public land review process for Amazon, because he and the governor are democratically elected, and the stakes are high (25K jobs)

— Dana Rubinstein (@danarubinstein) November 13, 2018

It’s this lack of transparency, as much as anything else that had commentators concerned, and local residents up in arms.

We’ve been getting calls and outreach from Queens residents all day about this.

The community’s response? Outrage. https://t.co/Jl4OIfa4gC

— Alexandria Ocasio-Cortez (@Ocasio2018) November 13, 2018

In fact, legislators in New York are already trying to find ways to have some say in the decision-making process, even, apparently after the fact.

In its defense Amazon and the officials who approved its deal have said that there would be no way to manage the process effectively if it went through normal channels. That’s the argument of autocrats and executives who want to move fast and break things, but the results of those policies are clear. When human lives and livelihood is at stake, perhaps it’s not the time to try and break things — especially in New York where everyone can tell you that everything is almost always already broken.

New York is throwing in another important subsidy to Amazon, which is two Senators, one of which is the minority leader. https://t.co/zlwl8S3LJu

— Matt Stoller (@matthewstoller) November 13, 2018

The tragedy for many citizens (who didn’t get a voice in the process), is that they understand something it seems their local politicians did not: Amazon would have likely come anyway.

Perhaps not in the same numbers, but certainly there would be no way for a company whose ambitions exceed almost every possible limit, to not have a significant presence in America’s media and political capitols.

There’s no better, or more succinct expression of Jeff Bezos’ goals with Amazon than this description of the company’s ambitions from The Nation. 

To think of Amazon as a retailer, though, is to profoundly misjudge the scope of what its founder and chief executive, Jeff Bezos, has set out to do. It’s not simply that Amazon does so much more than sell stuff—that it also produces hit television shows and movies; publishes books; designs digital devices; underwrites loans; delivers restaurant orders; sells a growing share of the Web’s advertising; manages the data of US intelligence agencies; operates the world’s largest streaming video-game platform; manufactures a growing array of products, from blouses to batteries; and is even venturing into health care.

Instead, it’s that Bezos has designed his company for a far more radical goal than merely dominating markets; he’s built Amazon to replace them. His vision is for Amazon to become the underlying infrastructure that commerce runs on.

Indeed, Amazon is pretty transparent about what its aims are. And its business units are beginning to rival those of its Chinese counterparts — although they’re far more beholden to the state.

Amazon’s decision to take #HQ2 to D.C. and NY is about enveloping government and media, the two primary checks on concentrated power in a democracy.

It’s decision to also go to Nashville is about deflection. 1/

— Stacy Mitchell (@stacyfmitchell) November 13, 2018

What might have been

There’s an Earth 2 version of this current situation where Amazon actually didn’t engage in a cynical inversion of normal government practices. One where the company actually scoured the country and looked for places to put a slew of reasonably sized offices staffed with some of the best and the brightest. Or chose two or three (or four) locations around the country from which to consolidate its position as America’s engine of commercial activity.

The results may have been still more power and influence for Bezos. But it could have been done with the input of the community that it would be impacting. And the choice could have been made publicly, with comment and input from all corners in an openly transparent process. Typically, that’s how government requests for proposal work.

Companies like Amazon, Apple, Facebook, Microsoft, and other tech titans should be primary benefactors of society, not net extractors. The more you have, the more you give. It’s not rocket science. Progressive taxation is a feature not a bug.

— DHH (@dhh) November 13, 2018

via TechCrunch

[fmservers]

The great Amazon swindle

Amazon has confirmed that it will open two massive new offices in New York City and Crystal City, Va., to complement its already massive headquarters in Seattle. And the verdict on the company’s decision is disgust.

Amazon played everyone involved in the process: the governments that pandered to it and the media that covered it (including us). Now it looks like the residents of these communities that will have to live with their new corporate neighbor are going to be left to pay for it.

In its search for a new office location or two, Amazon perverted the standard request-for-proposal process designed to provide transparency into how governments spend money on big projects. Either by design or happenstance, Amazon shat all over the process and the inherent transparency by which civic decisions are made.

That Amazon felt comfortable enough to flip the script and instead have cities bid for the largesse of a corporation was galling enough. The fact that cities across America actually did the company’s bidding was proof of just how feckless, toothless, and seemingly powerless government at every level in this country has become.

There couldn’t be a more perfect analogy for the return of the corporation as the central organizing principle in American life. And there couldn’t be a more perfect corporation to embody this than Amazon. City governments swooned, falling over themselves to offer even larger and more absurd concessions to Jeff Bezos’s behemoth.

The city of Stonecrest, Ga., offered to rename the town and make Jeff Bezos its permanent mayor should the company select it as the site for the new office “HQ2.” Birmingham, Ala., plastered fake Amazon boxes across the city and created a marketing campaign called “Bring A to B” to woo the “everything store.” Albany, N.Y.’s take was so pathos-inducing that it was eviscerated by The Onion.

the amazon cuomo method pic.twitter.com/ZU5Ds9lxmZ

— maya kosoff (@mekosoff) November 13, 2018

There was some hope, early in the process, that Amazon would indeed settle on some location in the American heartland and serve as another catalyst for growth for regions that are beginning to climb out of the economic holes dug in the financial crisis of a decade ago.

Perhaps one of the Midwestern metropolises that are already seeing a resurgence would enjoy an even bigger jolt from Amazon bestowing 50,000 new jobs on a region that could use it.

Columbus, Ohio, has a burgeoning technology scene and is enjoying incredible growth. Denver and Boulder, Colo., are also reaping the fruit of a technology and startup renaissance in the state. Indeed, across the country hope sprung eternal that Bezos and Amazon would bring a torrent of job opportunities and investment to places that could be rejuvenated to make America great again.

Unfortunately it was all just a year of wishful, wistful, magical thinking.

There’s no doubt that Amazon, with its $797.6 billion market capitalization, is the unnecessary winner in all of this. Cities opened their books to the company to prove their viability as a second home for the retailing giant. In return, Amazon got reams of data on urban and exurban centers that it could use to develop the next wave of its white collar office space, and over $2 billion worth of tax breaks from the cities that it would eventually call home for its new offices. 

The burden should not be on the 99 percent to prove we are worthy of the 1 percent’s presence in our communities, but rather on Amazon to prove it would be a responsible corporate neighbor. Corporate responsibility should take precedence over corporate welfare.

— Sen. Mike Gianaris (@SenGianaris) November 11, 2018

The big swindle?

New York City, which is offering up the bulk of the new tax incentives to Amazon will be spending roughly $1.5 billion for the privilege of having Amazon strain its already overtaxed infrastructure with 25,000 new employees. Those tax breaks will cover things like the construction of a helipad for the new offices so executives won’t have to worry about the failing city subway system.

The city is giving Amazon its refundable tax credit through New York State’s Excelsior Program. That up-to-$1.2 billion grant was calculated as a percentage of the salaries Amazon expects to pay employees over the next 10 years and amounts to $48,000 per employee Amazon brings in.

New York also gave an additional cash grant from the Empire State Development Corp. of $325 million based on the square footage of buildings occupied over the next decade. The incentives are set to roll out over the 10-year timeframe based on the incremental jobs Amazon creates each year and as it reaches building occupancy targets.

The carrot that Amazon has dangled in front of New York (and Long Island City more specifically) is more than 25,000 full-time jobs and a $2.5 billion in investment from Amazon in 4 million square feet of office space (which could expand up to 8 million). Amazon estimates that tax revenue will bring in $10 billion over the next 20 years through investment and job creation with the jobs expected to pay out an average wage of $150,000.

With all of this, the devil is in the details. The company says New York is spending $48,000 in incentives for employees that will make $150,000 on average, while the median salary for an Amazon employee in 2017 was $28,446 (excluding Jeff Bezos who took in $1,681,840).

Advocates who follow the commercial development space aren’t so sure. “We are suspicious of the way the whole incentives news has been issued today,” said Greg LeRoy, executive director of the development subsidy watchdog group, GoodJobsFirst. “It’s very odd that the company itself put in the information itself. It looks to us that Amazon is trying to cook the cost-benefit books.”

LeRoy says that by checking the numbers that Amazon says New York will be spending, the total is closer to $61,000 per job, not $48,000. Then Amazon rushes out with the $150,000 average salary, but the numbers aren’t comparable. The tax bill on a $150,000 salary for the state of New York is roughly 31 percent. “They’re going to pay whatever the state rate is, which won’t begin to offset the $61,000,” says LeRoy. “If the deal succeeds, there’s going to be new public sector costs. And if Amazon isn’t paying its fair share then everyone else gets stuck with paying higher taxes or getting lousier services or a little bit of both.”

There’s another problem with the deal that Amazon struck in New York, according to LeRoy. Through the agreement, Amazon has said it will build some new infrastructure around Long Island City through something called a Payment In Lieu Of Tax program. That’s when a portion of Amazon’s property taxes are funneled directly into projects that are located in the Long Island City community. In its announcement, the company said that it would donate space on its campus for a tech startup incubator and for use by artists and industrial businesses, and that it will donate a site for a new primary or intermediary public school. The company will also invest in infrastructure improvements and new green spaces — all paid for by the PILOT program.

LeRoy calls it another subsidy.

As housing prices climb in Queens for rentals, cooperatives and condominiums, the neighborhood’s existing residents will likely be unable to afford the higher property prices. They’ll be moved out and essentially Amazon will be paying for infrastructure upgrades likely to be enjoyed solely by the company’s employees — again, at the expense of the broader tax base.

“Instead of going to development fund of the city instead it will go back to the PILOT district, diverting money to a small part of the city,” says LeRoy. “[Amazon is] getting more than $2 billion of subsidies for white collar workers to be part of the 2 percent.”

However, Amazon’s new offices will undoubtedly create new wealth for the cities that they settle in. An article in The Denver Post described how Seattle’s coffers had been enriched by becoming the epicenter of all things Amazon.

Amazon estimates its direct spending boosted Seattle’s economy by $38 billion from 2010 to 2016. Hotels are thriving thanks to visits by friends and family of Amazon workers, as well as by Amazon employees from elsewhere. The Downtown Seattle Association estimates $5 billion in construction activity was underway during the summer, with more than 30,000 residential units in the works.

If Amazon’s figures are correct, then New York City, and the Washington metropolitan area, are set to receive a windfall (with Nashville, Tenn., also looking to make out pretty well in the deal).

It’s all about transparency

The question is less about whether Amazon’s decision to site its satellite offices in certain cities will be a boon to those cities. Instead, it’s whether the residents who already live there should be able to have a say in whether or not Amazon can come in and reshape their cities in radical ways.

De Blasio says it's ok that he and the governor are bypassing New York City's onerous public land review process for Amazon, because he and the governor are democratically elected, and the stakes are high (25K jobs)

— Dana Rubinstein (@danarubinstein) November 13, 2018

It’s this lack of transparency, as much as anything else that had commentators concerned, and local residents up in arms.

We’ve been getting calls and outreach from Queens residents all day about this.

The community’s response? Outrage. https://t.co/Jl4OIfa4gC

— Alexandria Ocasio-Cortez (@Ocasio2018) November 13, 2018

In fact, legislators in New York are already trying to find ways to have some say in the decision-making process, even, apparently after the fact.

In its defense Amazon and the officials who approved its deal have said that there would be no way to manage the process effectively if it went through normal channels. That’s the argument of autocrats and executives who want to move fast and break things, but the results of those policies are clear. When human lives and livelihood is at stake, perhaps it’s not the time to try and break things — especially in New York where everyone can tell you that everything is almost always already broken.

New York is throwing in another important subsidy to Amazon, which is two Senators, one of which is the minority leader. https://t.co/zlwl8S3LJu

— Matt Stoller (@matthewstoller) November 13, 2018

The tragedy for many citizens (who didn’t get a voice in the process), is that they understand something it seems their local politicians did not: Amazon would have likely come anyway.

Perhaps not in the same numbers, but certainly there would be no way for a company whose ambitions exceed almost every possible limit, to not have a significant presence in America’s media and political capitols.

There’s no better, or more succinct expression of Jeff Bezos’ goals with Amazon than this description of the company’s ambitions from The Nation. 

To think of Amazon as a retailer, though, is to profoundly misjudge the scope of what its founder and chief executive, Jeff Bezos, has set out to do. It’s not simply that Amazon does so much more than sell stuff—that it also produces hit television shows and movies; publishes books; designs digital devices; underwrites loans; delivers restaurant orders; sells a growing share of the Web’s advertising; manages the data of US intelligence agencies; operates the world’s largest streaming video-game platform; manufactures a growing array of products, from blouses to batteries; and is even venturing into health care.

Instead, it’s that Bezos has designed his company for a far more radical goal than merely dominating markets; he’s built Amazon to replace them. His vision is for Amazon to become the underlying infrastructure that commerce runs on.

Indeed, Amazon is pretty transparent about what its aims are. And its business units are beginning to rival those of its Chinese counterparts — although they’re far more beholden to the state.

Amazon’s decision to take #HQ2 to D.C. and NY is about enveloping government and media, the two primary checks on concentrated power in a democracy.

It’s decision to also go to Nashville is about deflection. 1/

— Stacy Mitchell (@stacyfmitchell) November 13, 2018

What might have been

There’s an Earth 2 version of this current situation where Amazon actually didn’t engage in a cynical inversion of normal government practices. One where the company actually scoured the country and looked for places to put a slew of reasonably sized offices staffed with some of the best and the brightest. Or chose two or three (or four) locations around the country from which to consolidate its position as America’s engine of commercial activity.

The results may have been still more power and influence for Bezos. But it could have been done with the input of the community that it would be impacting. And the choice could have been made publicly, with comment and input from all corners in an openly transparent process. Typically, that’s how government requests for proposal work.

Companies like Amazon, Apple, Facebook, Microsoft, and other tech titans should be primary benefactors of society, not net extractors. The more you have, the more you give. It’s not rocket science. Progressive taxation is a feature not a bug.

— DHH (@dhh) November 13, 2018

Via Jonathan Shieber https://techcrunch.com

[viralhottopics]

Scraping by on six figures? Tech workers feel poor in Silicon Valley’s wealth bubble

Big tech companies pay some of the countrys best salaries. But workers claim the high cost of living in the Bay Area has them feeling financially strained

I didnt become a software engineer to be trying to make ends meet, said a Twitter employee in his early 40s who earns a base salary of $160,000. It is, he added, a pretty bad income for raising a family in the Bay Area.

The biggest cost is his $3,000 rent which he said was ultra cheap for the area for a two-bedroom house in San Francisco, where he lives with his wife and two kids. Hed like a slightly bigger property, but finds himself competing with groups of twentysomethings happy to share accommodation while paying up to $2,000 for a single room.

Families are priced out of the market, he said, adding that family-friendly cafes and restaurants have slowly been replaced by hip coffee shops.

Silicon Valleys latest tech boom, combined with a housing shortage, has caused rents to soar over the last five years. The citys rents, by one measure, are now the highest in the world.

The prohibitive costs have displaced teachers, city workers, firefighters and other members of the middle class, not to mention low-income residents.

Now techies, many of whom are among the highest 1% of earners, are complaining that they, too, are being priced out.

The Twitter employee said he hit a low point in early 2014 when the company changed its payroll schedule, leaving him with a hole in his budget. I had to borrow money to make it through the month.

He was one of several tech workers, earning between $100,000 and $700,000 a year, who vented to the Guardian about their financial situation. Almost all of them spoke only on the condition of anonymity, or agreed only to give their first names, fearing retribution by their employers for speaking publicly about their predicament.

The American dream is not working out here

Complaints from well-compensated tech workers will sound like chutzpah to many of the other 99% who are struggling to get by on a fraction of their income. But there appears to be a growing frustration among tech workers who say that they are struggling to get by.

Facebook engineers last year even raised the issue with founder Mark Zuckerberg, asking whether the company could subsidize their rents to make their living situation more affordable, according to an executive at the company who has since departed.

The cost of housing is a common complaint among Bay Area techies. Engineers can expect, according to one analysis, to pay between 40% and 50% of their salary renting an apartment near work.

Twitter headquarters in San Francisco. Photograph: Bloomberg/Bloomberg via Getty Images

One Apple employee was recently living in a Santa Cruz garage, using a compost bucket as a toilet. Another tech worker, enrolled in a coding bootcamp, described how he lived with 12 other engineers in a two-bedroom apartment rented via Airbnb. It was $1,100 for a fucking bunk bed and five people in the same room. One guy was living in a closet, paying $1,400 for a private room.

We make over $1m between us, but we cant afford a house, said a woman in her 50s who works in digital marketing for a major telecoms corporation, while her partner works as an engineer at a digital media company. This is part of where the American dream is not working out here.

The prospect of losing her job and not having health insurance is a particular concern, given that she had cancer a couple of years ago. If Obamacare goes away and I lose my job I am deeply screwed, she said.

Michelle, a 28-year-old tech worker who earns a six-figure salary at a data science startup said her only chance of buying a home would be if she combined income with a partner. For all the feminist movement of you can do it all, the concept of home ownership is really truly out of reach, she said. For me thats disheartening.

Another tech worker feeling excluded from the real estate market was 41-year-old Michael, who works at a networking firm in Silicon Valley and last year earned $700,000. Sick of his 22-mile commute to work, which can sometimes take up to two and half hours, he explored buying a property nearer work.

We went to an open house in Los Gatos that would shorten my commute by eight miles. It was 1,700 sq ft and listed at $1.4m. It sold in 24 hours for $1.7m, he said.

Although he said his salary means he can afford to live a decent life, he finds the cost of living, combined with the terrible commute, unpalatable. Hes had enough, and has accepted a 50% pay cut to relocate to San Diego.

We will be unequivocally better off than we are now. He said he wont miss some of the more mundane day-to-day costs, like spending $8 on a bagel and coffee or $12 on freshly pressed juice.

Michael isnt the only tech worker considering leaving Silicon Valley in search of a better life. A Canadian IT specialist in his late 40s, earning more than $200,000, has a similar plan. When I came to the Bay Area the amount of money they were going to pay me seemed absurd, he said. However, the cost of rent and childcare, which cost more than I paid for my university education in Canada, has been hard to swallow.

Sam, 40, lives with his wife and three kids in San Jose, earning around $120,000 a year at a multinational software company. I get paid a very good wage, but I have three kids, childcare is ridiculously expensive so my wife mostly takes care of them, he said.

He feels pressure being the sole breadwinner. Ive got no safety net, he said. I have credit cards, but this is not sustainable. If something bad happened Id be out of the house in a month.

Glaring inequality

Fred Sherburn Zimmer from San Franciscos Housing Rights Committee agreed that housing is too expensive in the Bay Area, but points out that there are much graver consequences for people not working in tech.

For a senior whose healthcare is down the street, moving might be a death sentence, she said. For an immigrant family with two kids, moving out of a sanctuary city like San Francisco means you could get deported. She described a building in San Francisco where there are 28 people living in studio-like closets in a basement, including a senior and families with children.

For their part, many well-paid tech workers complaining about their own predicament say they also sympathize with the plight of people on more ordinary incomes.

We think a lot about how people with normal jobs afford to live here, said the Canadian IT specialist. The answer is: they dont. They commute from farther and farther afield.

The digital marketer added: During the first dotcom boom we had secretaries commuting three hours into work Its happening again. It was absurd then and its absurd now, she said, adding that she and her husband both know what its like to be poor.

A man walks by a homeless woman sleeping on the sidewalk San Franciscos Tenderloin district. Photograph: Gabrielle Lurie for the Guardian

Sam, who works at the software company, isnt optimistic about the future. The only solution I see is a huge reset and weve already done that once in the last decade. It was really painful for a lot of people, including myself, he said, referring to the dotcom crash in the early 2000s.

Some tech workers expressed a sense of guilt about their complaints when so many people are worse off, including San Franciscos desperate homeless population.

You are literally stepping over people to get to your job to make hundreds of thousands of dollars, said Michael. How do you go about your daily life as if it doesnt matter?

He suggested venture capitalists should stop investing in stupid applications and funnel some money into solving real societal problems like homelessness.

You are caught in this really uncomfortable position. You feel very guilty seeing such poverty and helplessness, added Michelle, the 28-year-old on a six-figure wage. But what are you supposed to do? Not make a lot of money? Not advocate for yourself and then not afford to live here?

Sam agreed. The whiny millennial snowflake type would say youre a terrible person making things worse for us. The truth is, if I gave up, what would I do? Should I knit sweaters and trade them?

Read more: http://bit.ly/2lVq4i4

from Scraping by on six figures? Tech workers feel poor in Silicon Valley’s wealth bubble

[newstfionline]

Tech workers feel poor in Silicon Valley’s wealth bubble

Olivia Solon, The Guardian, 27 February 2017

“I didn’t become a software engineer to be trying to make ends meet,” said a Twitter employee in his early 40s who earns a base salary of $160,000. It is, he added, a “pretty bad” income for raising a family in the Bay Area.

The biggest cost is his $3,000 rent--which he said was “ultra cheap” for the area--for a two-bedroom house in San Francisco, where he lives with his wife and two kids. He’d like a slightly bigger property, but finds himself competing with groups of twentysomethings happy to share accommodation while paying up to $2,000 for a single room.

“Families are priced out of the market,” he said, adding that family-friendly cafes and restaurants have slowly been replaced by “hip coffee shops”.

Silicon Valley’s latest tech boom has caused rents to soar over the last five years. The city’s rents, by one measure, are now the highest in the world.

The prohibitive costs have displaced teachers, city workers, firefighters and other members of the middle class, not to mention low-income residents, who have been virtually erased from the city.

Now techies, many of whom are among the highest 1% of earners, are complaining that they, too, are being priced out.

The Twitter employee said he hit a low point in early 2014 when the company changed its payroll schedule, leaving him with a hole in his budget. “I had to borrow money to make it through the month.”

He was one of several tech workers, earning between $100,000 and $700,000 a year, who vented to the Guardian about their financial situation. Almost all of them spoke only on the condition of anonymity, or agreed only to give their first names, fearing retribution by their employers for speaking publicly about their predicament.

Complaints from well-compensated tech workers will sound like chutzpah to many of the other 99% who are struggling to get by on a fraction of their income. But there appears to be a growing frustration among tech workers who say that they are struggling to get by.

Facebook engineers last year even raised the issue with founder Mark Zuckerberg, asking whether the company could subsidize their rents to make their living situation more affordable, according to an executive at the company who has since departed.

The cost of housing is a common complaint among Bay Area techies. Engineers can expect, according to one analysis, to pay between 40% and 50% of their salary renting an apartment near work.

One Apple employee was recently living in a Santa Cruz garage, using a compost bucket as a toilet. Another tech worker, enrolled in a coding bootcamp, described how he lived with 12 other engineers in a two-bedroom apartment rented via Airbnb. “It was $1,100 for a bunk bed and five people in the same room. One guy was living in a closet, paying $1,400 for a ‘private room’.”

“We make over $1m between us, but we can’t afford a house,” said a woman in her 50s who works in digital marketing for a major telecoms corporation, while her partner works as an engineer at a digital media company. “This is part of where the American dream is not working out here.”

The prospect of losing her job and not having health insurance is a particular concern, given that she had cancer a couple of years ago. “If Obamacare goes away and I lose my job I am deeply screwed,” she said.

Michelle, a 28-year-old tech worker who earns a six-figure salary at a data science startup said her only chance of buying a home would be if she combined income with a partner. “For all the feminist movement of ‘you can do it all’, the concept of home ownership is really truly out of reach,” she said. “For me that’s disheartening.”

Another tech worker feeling excluded from the real estate market was 41-year-old Michael, who works at a networking firm in Silicon Valley and last year earned $700,000. Sick of his 22-mile commute to work, which can sometimes take up to two and half hours, he explored buying a property nearer work.

“We went to an open house in Los Gatos that would shorten my commute by eight miles. It was 1,700 sq ft and listed at $1.4m. It sold in 24 hours for $1.7m,” he said.

Although he said his salary means he can afford to live a decent life, he finds the cost of living, combined with the terrible commute, unpalatable. He’s had enough, and has accepted a 50% pay cut to relocate to San Diego.

“We will be unequivocally better off than we are now.” He said he won’t miss some of the more mundane day-to-day costs, like spending $8 on a bagel and coffee or $12 on freshly pressed juice.

Michael isn’t the only tech worker considering leaving Silicon Valley in search of a better life. A Canadian IT specialist in his late 40s, earning more than $200,000, has a similar plan. “When I came to the Bay Area the amount of money they were going to pay me seemed absurd,” he said. However, the cost of rent and childcare, which cost “more than I paid for my university education in Canada”, has been hard to swallow.

Sam, 40, lives with his wife and three kids in San Jose, earning around $120,000 a year at a multinational software company. “I get paid a very good wage, but I have three kids, childcare is ridiculously expensive so my wife mostly takes care of them,” he said.

He feels pressure being the sole breadwinner. “I’ve got no safety net,” he said. “I have credit cards, but this is not sustainable. If something bad happened I’d be out of the house in a month.”

Fred Sherburn Zimmer from San Francisco’s Housing Rights Committee agreed that housing is too expensive in the Bay Area, but points out that there are much graver consequences for people not working in tech.

“For a senior whose healthcare is down the street, moving might be a death sentence,” she said. “For an immigrant family with two kids, moving out of a sanctuary city like San Francisco means you could get deported.” She described a building in San Francisco where there are 28 people living in “studio-like closets” in a basement, including a senior and families with children.

For their part, many well-paid tech workers complaining about their own predicament say they also sympathize with the plight of people on more ordinary incomes.

“We think a lot about how people with normal jobs afford to live here,” said the Canadian IT specialist. “The answer is: they don’t. They commute from farther and farther afield.”

The digital marketer added: “During the first dotcom boom we had secretaries commuting three hours into work … It’s happening again. It was absurd then and it’s absurd now,” she said, adding that she and her husband both “know what it’s like to be poor”.

Sam, who works at the software company, isn’t optimistic about the future. “The only solution I see is a huge reset and we’ve already done that once in the last decade. It was really painful for a lot of people, including myself,” he said, referring to the dotcom crash in the early 2000s.

Some tech workers expressed a sense of guilt about their complaints when so many people are worse off, including San Francisco’s desperate homeless population.

“You are literally stepping over people to get to your job to make hundreds of thousands of dollars,” said Michael. “How do you go about your daily life as if it doesn’t matter?”

He suggested venture capitalists should stop investing in “stupid applications” and funnel some money into solving real societal problems like homelessness.

“You are caught in this really uncomfortable position. You feel very guilty seeing such poverty and helplessness,” added Michelle, the 28-year-old on a six-figure wage. “But what are you supposed to do? Not make a lot of money? Not advocate for yourself and then not afford to live here?”

Sam agreed. “The whiny millennial snowflake type would say ‘you’re a terrible person making things worse for us’. The truth is, if I gave up, what would I do? Should I knit sweaters and trade them?”

[therightnewsnetwork]

Main Street Under Siege

I remember the event as if it were yesterday. The date was December 8, 2010. I was attending the surprise retirement party for a friend and client, Stan Druckenmiller, the most successful financial investor of his gener­ation with the best record of returns in the business. At age 57, he had announced several months earlier that he would retire from managing other people’s money.

As I walked into the dimly lit restaurant’s lobby, I thought of the near quarter-century I had spent as an adviser to the lead trading strategists of a number of large, macroeconomics-oriented hedge funds. This was a world in the midst of dramatic change as a result of the financial crisis that had exploded onto the scene two years earlier. For the hedge fund world in particular, and for financial markets in general, nothing would be the same. The same is true for the economy. The massive financial leverage of previous years was now a faint memory. At one time, the Wall Street banks funneled what seemed like unlimited loans to the hedge funds to take trading positions in various global financial instruments. Not anymore.

As Druckenmiller’s friends were awaiting his arrival, I looked over the crowd and thought to myself: This was not the “One Percent,” the target of the then rabid Occupy Wall Street movement. This was the One Thousandth of One Percent crowd. And all had one thing in common: Every day, they had “skin in the game”—that is, unlike the big Wall Street bankers, they bet their personal fortunes daily in various global markets based on their instinct for how the world worked.

But before the guest of honor arrived, something strange occurred. An unexpected guest arrived: Jamie Dimon, the chairman of JPMorgan Chase. Strangely, it was as if financial royalty had entered the room. A sudden energy was in the air. All eyes were fixed on the confident banker who, compared to his banking competi­tors, had been the most successful in negotiating around the landmines of the financial crisis.

As Dimon stood there, I also thought of Mick Jagger. For whatever the reason, like little boys these world-class billionaire money managers sheepishly made their way toward the banking star, hoping to achieve some momentary face time.

Then it hit me. Here was a situation that was completely absurd. What was happening was a perfect reflection of the degree to which the U.S. financial system had become removed from reality. A room full of the world’s most successful money managers worth billions of dollars, and who collectively traded trillions of dollars daily, were fawning over a mere banker. Although perhaps the best of the lot, Dimon was essen­tially the leader of what had become a collection of giant financial zom­bie institutions that were holding back the U.S. economy.

The situation reminded me how much the human psyche is wor­shipful of the kind of large institutions that form the core of today’s smothering Corporate Capitalism. That night, a room full of the world’s most sophisticated financial thinkers and risk-takers seemed strangely unaware that Dimon, after the financial crisis, was really the little man in the room. The system nevertheless worshipped bigness, and govern­ments and central banks stood ready to serve as the bankers’ valet, eager to be of help. By the time of the retirement dinner, the big banks were already beginning to repair their balance sheets. Perhaps Bill Frezza of the Competitive Enterprise Institute summed up the situation best when he suggested that the big Wall Street banks “perfected the art of privatiz­ing gains while socializing losses. They tested the limits of moral hazard and won.” Yet the rest of the financial system, including the financial heart of Main Street Capitalism—the regional and community banks that finance job creation in the small business sector—remained shattered. Their world was still unhinged.

There is a sense of unfairness about what unfolded. The world has become a collection of winners and losers, and the winners—usually large established institutions—are manipulating the system at the expense of the entrepreneurial newcomers. In 2011, for example, even the high-tech stars of innovation, Apple and Google, spent more money trying to squash or contain technological newcomers (hiring lawyers, extending patents, and purchasing potential rising competitive threats) than they spent on research and development. Tech investor Peter Thiel, who co-founded PayPal, argues that these firms are engaged in “the opposite of innovation; they are monopolies.” Main Street Capitalism, the Great Equalizer, the kind of capitalism that demands a level playing field, is under massive assault in this new zero-sum economic environ­ment where the “big” almost always carry the day.

Not convinced of this thesis? After the 2008 financial crisis, large corporations were flush with cash. Their balance sheets were as healthy as ever. That’s because, in the years after the crisis under the Federal Reserve’s medicine of near zero percent interest rates, the U.S. corpo­rate sector alone sold several trillion dollars’ worth of bonds and used more than half of the incoming funding to repurchase their own shares. While corporate debt across the board soared, champagne corks popped in corporate board rooms.

This absolute obsession with the big, the established, and the corpo­rate over the small, the new, and the entrepreneurial permeates Wash­ington, DC. But this bias has come at the expense of economic growth. So has the preoccupation with short-term financial gain over long-term prosperity for all.

As a result, average working families, both in the United States and all over the world, have sunk down into the muck of economic disappoint­ment and heartache. The economic strategists are at a loss. They thought the global economic and financial landscape was under their control. Prop up the Fortune 500 and the big Wall Street banks and all will be copacetic. These giant institutions, the establishment firmly believed, are the dominant financial underpinning of the capitalist system. Corporate Capitalism is king. Yet the truth turned out to be a lot more complicated.

True economic success emerges largely as a result of behavioral changes from the bottom up—not the top down. In his book The Evolu­tion of Everything, Matt Ridley points out the fascination by elites with top-down design rather than bottom-up “evolution” when it comes to major achievements in science, economics, and social change. Most breakthroughs evolve without architects and a grand design. They appear suddenly from the bottom up.

Indeed, we live in a world where the elites are constantly being sur­prised, whether by the rise of Facebook or of ISIS. Observes energy-pol­icy strategist J. Robinson West: “The generals always fight the last war. An example is the U.S. energy surge. It was the independents, not the major oil companies or the federal government, that caused the shale boom, responding to market forces. The generals were clueless because big bureaucracies don’t work anymore.”

Since the 2008 financial crisis, increased regulation and the zero interest rate policy have made the business models of the big banks obsolete. Those banks, and their global counterparts, have morphed into heavily regulated, relatively risk-averse organizations, not unlike the lackluster town water or electric utility company. The consolidation of the U.S. financial-services industry since the 2008 crisis has been a counterproductive development. These sluggish banks have held back the economy.

The big banks have access to capital and are protected and controlled by government. What they no longer have enough of is a risk-taking mindset. The bankers are engaged in a process of liquidity illusion. Instead of the banks providing full liquidity to the financial markets, that liquidity for years has been provided by hedge funds and by private equity firms with hedge fund components. Observes hedge-fund man­ager Scott Bessent: “I am no fan of the big banks, but the Fed and other regulators have developed an incongruous posture toward these institu­tions, providing a massive amount of monetary easing on the one hand and regulatory overreaction on the other. The new bank fines and other penalties are stifling normal loan growth and hurting the economy. The regulators were asleep during the housing bubble. The banks’ bad actors from the 2003–2008 period got away. But now Main Street is being asked to pay the price.”

The real concern is that since the 2008 financial crisis, the U.S. bank­ing system has consolidated. Now 80 percent of America’s bank capital for investment is controlled by only a dozen giant zombie banks. Before the crisis, the top dozen banks controlled only 45–50 percent of such capital.

America has entered a new era of politicized banking with decision-making held by relatively few banking institutions, the U.S. Treasury, and the Federal Reserve. In a dramatic reshaping of the U.S. financial sector, today four banks alone—JPMorgan Chase, Bank of America, Citibank, and Wells Fargo—now control nearly 60 percent of all U.S. bank assets (all four banks have been fined for illegal banking practices). Armies of regulators camp out in these big banks every day, looking up the bank­ers’ nostrils. American finance has centralized, and that has been a bad thing for the economy. And so has Washington, DC’s nonstop infatua­tion with top-down economic management.

To be sure, after the financial crisis and all its heartache and economic destruction, having a few big banks become the center of credit allocation at initial glance no doubt sounded reassuring. It was Washington’s idea of controlling financial risk. Yet if the goal was to restore middle-class jobs lost by a decline in the ability of small and medium-sized innovative enterprises to survive, this new financial architecture was insanely counterproductive. True, some of those bankers should have gone to jail. The justice system failed to do its job. Yet the fact remains that a vigorous economy depends on a vigorous banking system. Banks, big and small, are the nerve center of the private economy. Crush the nerve center, and you crush the economy.

In policymakers’ attempts to regulate and restructure away financial risk, however, American working families and small businesses have suffered the most. And unlike in Europe and Japan, the U.S. financial sys­tem until now has never been overwhelmingly dominated by big banks. America has traditionally benefited from a vibrant, multilayered system of financial intermediation. True, banks have always been responsible for a large percentage of overall credit allocation. But both large and small institutions engaged in the deployment of credit to the economy. That is one reason the U.S. economy has historically been a robust job-creating machine and hothouse of innovation. Small and regional bank funds, and community banks, joined venture capital funds, turnaround funds, and private mezzanine financing in contributing to the achievement of a brisk growth in innovation.

To one degree or another, these sources of funding were all committed to Main Street Capitalism. That dynamic is now missing from today’s consolidated banking system. Big banks take a financial risk on Google only after Google becomes Google, not before. Today the coddled Wall Street banks, in many cases now drained of their best talent (who often moved to hedge funds and private equity firms), have become the central focal point of America’s financial universe. Washington, DC, has become America’s new financial capital. And one more thing: If hedge funds are left as the financial system’s private providers of liquidity, that system has a problem. Hedge funds exist for two purposes: (1) to earn a profit for their owners and investors, and (2) to bring efficiency to financial market prices (i.e., to challenge policy officials when they stretch the truth and corporate CEOs when they shade the reality on their balance sheets).

The true shame of the 2008 financial crisis is that the big and the powerful were the most protected because of the risk their failure would pose to the larger financial system. Wall Street banks were allowed to engage in fiction relating to mortgages, particularly home equity lines of credit. They financed second mortgages that often were worthless. Because these loans were not written down, the banks overstated earn­ings and increased bonus pools for their executives. And, lo and behold, these executives often held fundraisers for politicians. Note that part of the banks’ actions stemmed from the insistence by Congress on the sub­sidizing of home ownership through government-sponsored enterprises (GSEs)—such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

In response to the financial crisis, policymakers engineered a $700 billion taxpayer-funded bailout. But in this great stare-down between Washington and Wall Street, Washington blinked. Instead of using those resources to confront the problem of toxic waste on bank balance sheets that had forced the banks into this corner of timidity, U.S. policymakers deployed its own version of what the Japanese did in response to their commercial real estate crisis in the late 1980s and early 1990s. Japanese policymakers bowed to political pressure and failed to insist that the toxic assets on the bank balance sheets be immediately marked down in price. Tokyo policymakers “got chicken.” They took halfway measures because removing the toxic assets would have been an admission of fail­ure and sign of disgrace. The entire senior management of the Japanese banking industry would have had to have been removed. In the case of Washington after the 2008 crisis, authorities bought the big banks’ stock. Washington also “got chicken.” Instead of real pricing, the big U.S. banks got Soviet-style Gosplan pricing, based on government-inspired mark-to-market fiction followed by a blind-eyed overregulation by the Federal Reserve.

After the period of consolidation, the big banks began to regain their composure in their new zombie state. But that wasn’t true for small and medium-sized companies, or for the thousands of small, regional, and community banks that fund them. These enterprises were all credit-starved right from the start. And, in many cases, they still are.

Local community banks are the workhorses of the financial system. They supply the vast majority of small business loans. Since the financial crisis, more than 500 of these banks have collapsed, struck down by a crisis environment for which they bore little blame. Is it surprising that since 2008, small business startups and productivity growth rates have been disappointing? One solution, suggested by economist Robert Sha­piro, is for the Federal Reserve—to correct its too heavy-handed regula­tory blunders—to “require or encourage” large banking institutions that draw on the Fed’s cheap credit to identify a specified increment of the new credit creation that goes to young enterprises.

Make no mistake, there was something horribly wrong with the post-crisis picture. And it is clear why working families today are so angry. After 2008, if you were a failed, brain-dead Wall Street banker who nearly tanked the world economy, you had easy access to the Federal Reserve’s cheap liquidity. If you failed as a giant bank, you were consid­ered special. Your bank could systemically bring down the entire finan­cial system. But if you were a struggling enterprise out there alone with a brilliant idea that could someday employ thousands of people, obtaining financing was next to impossible. The normal sources of risk capital had dried up, but no one from Washington, DC, was there with your safety net. The too-big-to-fail banks enjoyed a cost of borrowing far lower than other firms because financial markets became convinced government authorities would never let the big banks go under. The fix was in.

David Smick is a financial market consultant and a nonfiction author. He is the chairman and CEO of Johnson Smick International, an advisory firm in Washington, D.C and the publisher and the founding editor of the quarterly magazine International Economy. He also published widely, including in the New York Times, the Wall Street Journal and the Washington Post.

This article is excerpted from The Great Equalizer: How Main Street Capitalism Can Create an Economy for Everyone by David Smick. Copyright © 2017. Available from PublicAffairs, an imprint of Perseus Books, LLC, a subsidiary of Hachette Book Group, Inc.

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[patriotnewsblogger-blog]

Main Street Under Siege

New Post has been published on http://www.therightnewsnetwork.com/main-street-under-siege/

Main Street Under Siege

I remember the event as if it were yesterday. The date was December 8, 2010. I was attending the surprise retirement party for a friend and client, Stan Druckenmiller, the most successful financial investor of his gener­ation with the best record of returns in the business. At age 57, he had announced several months earlier that he would retire from managing other people’s money.

As I walked into the dimly lit restaurant’s lobby, I thought of the near quarter-century I had spent as an adviser to the lead trading strategists of a number of large, macroeconomics-oriented hedge funds. This was a world in the midst of dramatic change as a result of the financial crisis that had exploded onto the scene two years earlier. For the hedge fund world in particular, and for financial markets in general, nothing would be the same. The same is true for the economy. The massive financial leverage of previous years was now a faint memory. At one time, the Wall Street banks funneled what seemed like unlimited loans to the hedge funds to take trading positions in various global financial instruments. Not anymore.

As Druckenmiller’s friends were awaiting his arrival, I looked over the crowd and thought to myself: This was not the “One Percent,” the target of the then rabid Occupy Wall Street movement. This was the One Thousandth of One Percent crowd. And all had one thing in common: Every day, they had “skin in the game”—that is, unlike the big Wall Street bankers, they bet their personal fortunes daily in various global markets based on their instinct for how the world worked.

But before the guest of honor arrived, something strange occurred. An unexpected guest arrived: Jamie Dimon, the chairman of JPMorgan Chase. Strangely, it was as if financial royalty had entered the room. A sudden energy was in the air. All eyes were fixed on the confident banker who, compared to his banking competi­tors, had been the most successful in negotiating around the landmines of the financial crisis.

As Dimon stood there, I also thought of Mick Jagger. For whatever the reason, like little boys these world-class billionaire money managers sheepishly made their way toward the banking star, hoping to achieve some momentary face time.

Then it hit me. Here was a situation that was completely absurd. What was happening was a perfect reflection of the degree to which the U.S. financial system had become removed from reality. A room full of the world’s most successful money managers worth billions of dollars, and who collectively traded trillions of dollars daily, were fawning over a mere banker. Although perhaps the best of the lot, Dimon was essen­tially the leader of what had become a collection of giant financial zom­bie institutions that were holding back the U.S. economy.

The situation reminded me how much the human psyche is wor­shipful of the kind of large institutions that form the core of today’s smothering Corporate Capitalism. That night, a room full of the world’s most sophisticated financial thinkers and risk-takers seemed strangely unaware that Dimon, after the financial crisis, was really the little man in the room. The system nevertheless worshipped bigness, and govern­ments and central banks stood ready to serve as the bankers’ valet, eager to be of help. By the time of the retirement dinner, the big banks were already beginning to repair their balance sheets. Perhaps Bill Frezza of the Competitive Enterprise Institute summed up the situation best when he suggested that the big Wall Street banks “perfected the art of privatiz­ing gains while socializing losses. They tested the limits of moral hazard and won.” Yet the rest of the financial system, including the financial heart of Main Street Capitalism—the regional and community banks that finance job creation in the small business sector—remained shattered. Their world was still unhinged.

There is a sense of unfairness about what unfolded. The world has become a collection of winners and losers, and the winners—usually large established institutions—are manipulating the system at the expense of the entrepreneurial newcomers. In 2011, for example, even the high-tech stars of innovation, Apple and Google, spent more money trying to squash or contain technological newcomers (hiring lawyers, extending patents, and purchasing potential rising competitive threats) than they spent on research and development. Tech investor Peter Thiel, who co-founded PayPal, argues that these firms are engaged in “the opposite of innovation; they are monopolies.” Main Street Capitalism, the Great Equalizer, the kind of capitalism that demands a level playing field, is under massive assault in this new zero-sum economic environ­ment where the “big” almost always carry the day.

Not convinced of this thesis? After the 2008 financial crisis, large corporations were flush with cash. Their balance sheets were as healthy as ever. That’s because, in the years after the crisis under the Federal Reserve’s medicine of near zero percent interest rates, the U.S. corpo­rate sector alone sold several trillion dollars’ worth of bonds and used more than half of the incoming funding to repurchase their own shares. While corporate debt across the board soared, champagne corks popped in corporate board rooms.

This absolute obsession with the big, the established, and the corpo­rate over the small, the new, and the entrepreneurial permeates Wash­ington, DC. But this bias has come at the expense of economic growth. So has the preoccupation with short-term financial gain over long-term prosperity for all.

As a result, average working families, both in the United States and all over the world, have sunk down into the muck of economic disappoint­ment and heartache. The economic strategists are at a loss. They thought the global economic and financial landscape was under their control. Prop up the Fortune 500 and the big Wall Street banks and all will be copacetic. These giant institutions, the establishment firmly believed, are the dominant financial underpinning of the capitalist system. Corporate Capitalism is king. Yet the truth turned out to be a lot more complicated.

True economic success emerges largely as a result of behavioral changes from the bottom up—not the top down. In his book The Evolu­tion of Everything, Matt Ridley points out the fascination by elites with top-down design rather than bottom-up “evolution” when it comes to major achievements in science, economics, and social change. Most breakthroughs evolve without architects and a grand design. They appear suddenly from the bottom up.

Indeed, we live in a world where the elites are constantly being sur­prised, whether by the rise of Facebook or of ISIS. Observes energy-pol­icy strategist J. Robinson West: “The generals always fight the last war. An example is the U.S. energy surge. It was the independents, not the major oil companies or the federal government, that caused the shale boom, responding to market forces. The generals were clueless because big bureaucracies don’t work anymore.”

Since the 2008 financial crisis, increased regulation and the zero interest rate policy have made the business models of the big banks obsolete. Those banks, and their global counterparts, have morphed into heavily regulated, relatively risk-averse organizations, not unlike the lackluster town water or electric utility company. The consolidation of the U.S. financial-services industry since the 2008 crisis has been a counterproductive development. These sluggish banks have held back the economy.

The big banks have access to capital and are protected and controlled by government. What they no longer have enough of is a risk-taking mindset. The bankers are engaged in a process of liquidity illusion. Instead of the banks providing full liquidity to the financial markets, that liquidity for years has been provided by hedge funds and by private equity firms with hedge fund components. Observes hedge-fund man­ager Scott Bessent: “I am no fan of the big banks, but the Fed and other regulators have developed an incongruous posture toward these institu­tions, providing a massive amount of monetary easing on the one hand and regulatory overreaction on the other. The new bank fines and other penalties are stifling normal loan growth and hurting the economy. The regulators were asleep during the housing bubble. The banks’ bad actors from the 2003–2008 period got away. But now Main Street is being asked to pay the price.”

The real concern is that since the 2008 financial crisis, the U.S. bank­ing system has consolidated. Now 80 percent of America’s bank capital for investment is controlled by only a dozen giant zombie banks. Before the crisis, the top dozen banks controlled only 45–50 percent of such capital.

America has entered a new era of politicized banking with decision-making held by relatively few banking institutions, the U.S. Treasury, and the Federal Reserve. In a dramatic reshaping of the U.S. financial sector, today four banks alone—JPMorgan Chase, Bank of America, Citibank, and Wells Fargo—now control nearly 60 percent of all U.S. bank assets (all four banks have been fined for illegal banking practices). Armies of regulators camp out in these big banks every day, looking up the bank­ers’ nostrils. American finance has centralized, and that has been a bad thing for the economy. And so has Washington, DC’s nonstop infatua­tion with top-down economic management.

To be sure, after the financial crisis and all its heartache and economic destruction, having a few big banks become the center of credit allocation at initial glance no doubt sounded reassuring. It was Washington’s idea of controlling financial risk. Yet if the goal was to restore middle-class jobs lost by a decline in the ability of small and medium-sized innovative enterprises to survive, this new financial architecture was insanely counterproductive. True, some of those bankers should have gone to jail. The justice system failed to do its job. Yet the fact remains that a vigorous economy depends on a vigorous banking system. Banks, big and small, are the nerve center of the private economy. Crush the nerve center, and you crush the economy.

In policymakers’ attempts to regulate and restructure away financial risk, however, American working families and small businesses have suffered the most. And unlike in Europe and Japan, the U.S. financial sys­tem until now has never been overwhelmingly dominated by big banks. America has traditionally benefited from a vibrant, multilayered system of financial intermediation. True, banks have always been responsible for a large percentage of overall credit allocation. But both large and small institutions engaged in the deployment of credit to the economy. That is one reason the U.S. economy has historically been a robust job-creating machine and hothouse of innovation. Small and regional bank funds, and community banks, joined venture capital funds, turnaround funds, and private mezzanine financing in contributing to the achievement of a brisk growth in innovation.

To one degree or another, these sources of funding were all committed to Main Street Capitalism. That dynamic is now missing from today’s consolidated banking system. Big banks take a financial risk on Google only after Google becomes Google, not before. Today the coddled Wall Street banks, in many cases now drained of their best talent (who often moved to hedge funds and private equity firms), have become the central focal point of America’s financial universe. Washington, DC, has become America’s new financial capital. And one more thing: If hedge funds are left as the financial system’s private providers of liquidity, that system has a problem. Hedge funds exist for two purposes: (1) to earn a profit for their owners and investors, and (2) to bring efficiency to financial market prices (i.e., to challenge policy officials when they stretch the truth and corporate CEOs when they shade the reality on their balance sheets).

The true shame of the 2008 financial crisis is that the big and the powerful were the most protected because of the risk their failure would pose to the larger financial system. Wall Street banks were allowed to engage in fiction relating to mortgages, particularly home equity lines of credit. They financed second mortgages that often were worthless. Because these loans were not written down, the banks overstated earn­ings and increased bonus pools for their executives. And, lo and behold, these executives often held fundraisers for politicians. Note that part of the banks’ actions stemmed from the insistence by Congress on the sub­sidizing of home ownership through government-sponsored enterprises (GSEs)—such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

In response to the financial crisis, policymakers engineered a $700 billion taxpayer-funded bailout. But in this great stare-down between Washington and Wall Street, Washington blinked. Instead of using those resources to confront the problem of toxic waste on bank balance sheets that had forced the banks into this corner of timidity, U.S. policymakers deployed its own version of what the Japanese did in response to their commercial real estate crisis in the late 1980s and early 1990s. Japanese policymakers bowed to political pressure and failed to insist that the toxic assets on the bank balance sheets be immediately marked down in price. Tokyo policymakers “got chicken.” They took halfway measures because removing the toxic assets would have been an admission of fail­ure and sign of disgrace. The entire senior management of the Japanese banking industry would have had to have been removed. In the case of Washington after the 2008 crisis, authorities bought the big banks’ stock. Washington also “got chicken.” Instead of real pricing, the big U.S. banks got Soviet-style Gosplan pricing, based on government-inspired mark-to-market fiction followed by a blind-eyed overregulation by the Federal Reserve.

After the period of consolidation, the big banks began to regain their composure in their new zombie state. But that wasn’t true for small and medium-sized companies, or for the thousands of small, regional, and community banks that fund them. These enterprises were all credit-starved right from the start. And, in many cases, they still are.

Local community banks are the workhorses of the financial system. They supply the vast majority of small business loans. Since the financial crisis, more than 500 of these banks have collapsed, struck down by a crisis environment for which they bore little blame. Is it surprising that since 2008, small business startups and productivity growth rates have been disappointing? One solution, suggested by economist Robert Sha­piro, is for the Federal Reserve—to correct its too heavy-handed regula­tory blunders—to “require or encourage” large banking institutions that draw on the Fed’s cheap credit to identify a specified increment of the new credit creation that goes to young enterprises.

Make no mistake, there was something horribly wrong with the post-crisis picture. And it is clear why working families today are so angry. After 2008, if you were a failed, brain-dead Wall Street banker who nearly tanked the world economy, you had easy access to the Federal Reserve’s cheap liquidity. If you failed as a giant bank, you were consid­ered special. Your bank could systemically bring down the entire finan­cial system. But if you were a struggling enterprise out there alone with a brilliant idea that could someday employ thousands of people, obtaining financing was next to impossible. The normal sources of risk capital had dried up, but no one from Washington, DC, was there with your safety net. The too-big-to-fail banks enjoyed a cost of borrowing far lower than other firms because financial markets became convinced government authorities would never let the big banks go under. The fix was in.

David Smick is a financial market consultant and a nonfiction author. He is the chairman and CEO of Johnson Smick International, an advisory firm in Washington, D.C and the publisher and the founding editor of the quarterly magazine International Economy. He also published widely, including in the New York Times, the Wall Street Journal and the Washington Post.

This article is excerpted from The Great Equalizer: How Main Street Capitalism Can Create an Economy for Everyone by David Smick. Copyright © 2017. Available from PublicAffairs, an imprint of Perseus Books, LLC, a subsidiary of Hachette Book Group, Inc.

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