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Banks and Schools

Updated: Jul 20, 2023

There are two headlines this week that have really upset me. The first was the two biggest school districts in California, Los Angeles and San Diego Unified, announcing that students will not be returning to the classroom this Fall, and the second was Goldman Sachs’s earnings report. These two news items may seem disparate in nature, but they are not.

Goldman’s quarterly revenue posted its second-highest reading ever. They generated $13.3 billion of revenue and earnings per share of $6.26 per share. Goldman's earnings release follows beats from Citigroup and JPMorgan on Tuesday, and both of those firms beat expectations for revenue and earnings. Trading and investment-banking incomes more than made up for credit reserve builds, and their trading businesses benefited enormously from the heightened market volatility.

Goldman’s numbers were downright obscene. It’s now irrefutable that The Fed was able to engineer a huge rally in the markets by injecting trillions of dollars of stimulus and that it primarily benefited investment banks. But how’s your local small business owner doing? If this quarter’s bank earnings don’t lead to calls for the government to do more to help Main Street rather than Wall Street, I don’t know what will.

“The relationship between the business cycle and the health of the business sector and the health of the household sector is broken,” JPMorgan Chief Financial Officer Jennifer Piepszak said on their Q2 earnings conference call.

Unfortunately, our second big headline of the week suggests that the broken health of the household that Piepszak discussed is only about to get worse: Not opening schools in the Fall is likely to be an economic disaster that will serve to deepen the already large divide between Wall Street and Main Street.

If parents don’t have schools (to which our society outsourced child care responsibilities long ago) available in another month or so, they won’t be able to go to work no matter how much they want to. Our economy is effectively muting the bottom 90%’s ability to earn, let alone to spend, and the wealth gap is growing.

You see it in all the numbers:

And now they won’t have schools. Parents can’t even safely drop off their beloved little disease vectors at their grandparents' for a few hours anymore—there is no one to provide even so much as respite care for them. It’s difficult not to expect many, many more school districts to adopt LAUSD’s and SDUSD’s all-online program this Fall, which can only mean that parents will be chained to their homes with their children for several more months. Imagine watching your unemployment assistance getting halved, with no health insurance, while having a zero possibility of going to a job, while trying to teach your kid soh-cah-toa.

Now, imagine that happening while The Fed’s open market facility buys Apple’s bonds. Apple, the world’s largest company-- that’s currently sitting on $95 billion of cash. The taxpayer has basically been funding their dividends and stock buy-backs.

And then you see this quarter’s trading revenues on Wall Street. If I were a gym owner or a restaurant server or a hair stylist, I’d be furious.

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