It would be easy to imagine that America’s banking industry is having a rough go of things in 2014. Justice Department officials tout multi-billion-dollar legal settlements with banks and lawmakers talk as though the financial industry were under assault by big government shock troopers. But these are in fact boom times for the money business, the Wall Street Journal reported Monday.
American banks reported a combined $40.24 billion in profit for the second quarter of the year, coming up just barely shy of the record profit of $40.36 billion that the industry notched in the first three months of last year. That mark remains the highest in the 23-year history of the data tracked by SNL Financial, the Journal reported.
The continued prosperity in the financial sector contrasts with the lingering weakness in the parts of the economy that are more directly tied to the well-being of the middle class. With the sixth unofficial anniversary of the financial crisis approaching this fall, the institutions that caused the Great Recession have not only returned to growth but rebounded to record levels of success.
But millions of American workers are still unemployed and wages have stagnated for years for most of those lucky enough to have found work. The large crop of working people who ended up unemployed for over six months in the wake of the financial collapse face essentially insurmountable obstacles to finding a job at this point.
About five years after the recession officially ended, a slow and uneven recovery has restored the richest tenth of the country to the levels of material security they enjoyed in the early 2000s. But the median household is worth roughly $32,000 less than it was in 2003.
The disparity between banks and the wealthy on one hand and typical American families on the other reflects the root differences in where the top and middle of the income distribution keep their wealth. The kinds of assets that are common among the wealthy — investments in the stock market and other financial holdings — have rebounded in value very quickly after the crisis. Middle-class homeowners whose wealth depends primarily on housing prices have not been so lucky.
Meanwhile, the same industry that turned the housing market into an elaborate gambling parlor in the early 2000s has returned to near-record profitability. Government prosecutors have allowed banks to buy their way out of full accountability for their actions in the run-up to the collapse, exaggerating the cost of those legal settlements in the process. And the executives who piloted those banks during the pre-crisis trading blitz walked away with their personal fortunes intact.
Some Wall Street firms are even buying up the hundreds of thousands of homes that Americans lost to foreclosure during the recession and renting them out to families in need. They hope to make hundreds of millions of dollars from a new set of housing investment products modeled on the pre-crisis mortgage market, but this time with tenants rather than homeowners serving as the basis for the investment deals.