Local author writes about Wall Street’s influence

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Informing Americans about one of the most important issues facing the nation is the aim of “Wall Street’s War with Middle America,” by Belen author DeForest W. Colegrove and James L. Marsis.

Deborah Fox-News-Bulletin photo: DeForest “Bud” Colegrove is a resident of Belen and the co-author of ‘Wall Street’s War with Middle America.’

Both authors have been economic professors in the United States, and Colegrove has taught in Europe as well.

The large-print, slim volume book offers readers easy-to-follow explanations of why the American economy is no longer functioning for middle America.

“We see that it is no longer working as it should,” Colegrove said. “As an example, if you look at the statistics, the world consumes about 82 million barrels of oil a day, but we produce 84 million barrels, so why is the price of gas at $3 or $4? Why is that? It’s because, and in our book we talk at length about it, the manipulation of the market.

“We no longer have supply and demand,” he said. “If you want to go to the store and buy pears or pickles or peppers, you usually pay market price, but if you want to buy gasoline — Wall Street has really gotten involved in manipulating the prices … we should be paying 30 cents or 40 cents a gallon for gas because there’s plenty of it.

“The more we dug into it, the more intriguing it became because very few people know what’s really going on,” Coleman said.

The author said wages are stagnant because there is an inverse relationship between the earning trends of finance and that of average working Americans. In the book, the authors explain the Gini index measures income distribution trends.

“It’s the degree to which the rich and poor are separated,” Colegrove said. “The gap between the rich and the poor is getting bigger and bigger.”

Colegrove and Marsis worked on “Wall Street’s War with Middle America” for the past three years. Colegrove did the research and editing, while Marsis wrote the text.

They met in the early 1990s at Salve Regina University in Newport, R.I., and have taught economics at the undergraduate and graduate levels for more than two decades.

“We worked on the book nights, days — long, long hours,” Colegrove said. “I believe it is a revelation of a revolution — people don’t realize how much the money centers around Wall Street in New York City.”

The true source of the average American’s economic hardship began in the 1980s when investment banks, led by financier Michael Milken, realized just how easy it was to seize control of a corporation through junk bonds, and then use that control to vote themselves huge dividends, he said.

Corporate takeovers like these are what made billionaires in finance a commonplace occurrence, he said.

Mergers and acquisitions cost many Americans their jobs, while other financial instruments cost them their homes, the author said.

Before the 1990s, financial regulations kept commercial banks separate from investment banks. It kept bankers from gambling with their clients’ money, but bankers pressured the government into relaxing the rules, and in 1997, President Bill Clinton signed the Financial Services Modernization Act, which removed the separation between commercial and investment banks.

Financiers created “products” such as asset-backed securities, by bundling together low- and high-risk mortgages into one package. They sold these packages to investment banks around the globe, amassing huge fortunes for Wall Street, the authors say.

Hedge funds are another financial instrument used by Wall Street to extract fortunes. Hedge fund managers put together groups of investors, for example 10 people with $10 million each, invest the $100 million lump sum, and earn a percentage of the profits as the manager’s fee, he said.

“The kind of money these guys make is in the billions,” Colegrove said. “The big money that is being made is coming from the pockets of average people, because the top and the middle are bound together in a see-saw relationship. The decline in middle class incomes that we are currently experiencing is in perfect step with the rise of Wall Street’s prosperity.”

It will take legislation to restore the separation between commercial and investment banks and put controls on derivatives, he said, and Americans need to vote in the people who will do something about Wall Street corruption.

“What the average citizen can do is write to their congressmen and senators, pressure them to learn about what is going on, and demand something be done,” said Colegrove.

“Wall Street’s War with Middle America” is the authors’ first book, but they have also collaborated on a document entitled “Market Economics — A Practical Primer,” that became an introductory course in economics for students in non-capitalistic areas.

“Wall Street’s War with Middle America” can be purchased at www.amazon.com for $10.80.


-- Email the author at dfox@news-bulletin.com.