The conventional wisdom–encouraged by the media, the two New York U.S. Senators, and the billionaire mayor of New York City, among others–is that Wall Street is the central engine of the city and state economy, and that it contributes so much to the economy that it must be protected and enhanced. The problem, some of these conventional wisdom folks say, is that things got a little out of hand, regulations were relaxed too much and, thus, we had a terrible economic crisis. And, finally, we are told, if we just put in place some new regulations, things will be fine. The vibe is pretty close to the old slogan that what is good for General Motors is good for America. In this incarnation, we continually are told, essentially, that what is good for Wall Street is good for New York–and, some of the cheer-leading sometimes extends to incorporate the nation as the beneficiary of Wall Street’s economic benefits.

  This is false. Wall Street is the exact opposite of the General Motors model. And a lot of this false argument is the product of a combination of greed, political power and flawed economics.

  And if, at the end of the legislative process, we end up with a bill that continues to echo the logic of "Wall Street is New York’s General Motors", and doesn’t cut Wall Street–a broad term that I use for financial services–down to a proper size and proper role in the economy, then, we will have failed. In other words, it’s not simply about restoring safeguards against greed. It’s about having a larger, healthier view of the economy. Let me explain my view in two parts.

  Let’s start with the relatively narrow question about Wall Street’s importance to jobs and the economy. What hurt the state more–not to mention, the nation–is the loss of jobs outside of Wall Street–a loss largely caused by the greed on Wall Street. How we got here is nicely summed by the Fiscal Policy Institute:

The Great Recession is mainly the consequence of poorly regulated financial institutions that went on a spree of excessive debt and risk-taking, destructive lending practices, and use of ill-advised exotic financial instruments. The national economic expansion following the economy’s slump from 2001 to 2003 was dominated by unsustainable and dangerous bubbles in housing and the financial markets. It was also characterized by excessive borrowing by Americans struggling to maintain their standard of living while their real wages fell.

New Yorkers know the story all too well: In 2007, the financial markets suddenly faltered, revealing that Wall Street firms controlling more than $10 trillion in assets had taken huge risks and traded in "toxic" securitized mortgages and derivatives to pump up profits. By fall 2008, worldwide credit markets were frozen and the stock market was in freefall, eroding working families’ retirement savings and pension funds, and triggering massive job cuts across New York. In the wake of the meltdown, consumer spending plummeted and small business loans virtually disappeared. The triple impact of stagnant wages, record income inequality, and the jobless "recovery" is now wreaking havoc on New Yorkers.

  And here is the impact far beyond Wall Street:

850,000 New Yorkers are unemployed, the highest number on record, and 40 percent of them have been out of work for over six months. One in six has been jobless for more than a year.New Yorkers are still losing jobs in large numbers. Each week during the first three months of 2010,

an average of 30,000 workers filed initial claims for unemployment.

• New York has lost 350,000 jobs over the past two years, with the loss of 295,000 moderate- and middle-wage jobs, nearly five times as great as the finance sector employment losses. (The severity of the Great Recession would have claimed another 193,000 New York jobs as of March 2010, according to the President’s Council of Economic Advisers, were it not for the $800 billion February 2009 stimulus package, the American Recovery and Reinvestment Act.)

• The recession has cost New York’s workers $58 billion in lost wages as of the end of March 2010, and is on track to result in a total of $265 billion in lost wages through the end of 2013.

• The official state unemployment rate stands at 8.6 percent, and the underemployment rate—often called the "real" unemployment rate—is now nearly 15 percent.

• Over 100,000 New York families have lost their homes through foreclosure in the past two years, saddling families with the high costs of motels and other temporary housing, disrupting children’s schooling, and often resulting in long-term housing insecurity.

• The loss of jobs and wages has increased the number of New Yorkers relying on food stamps to over 2.5 million, a 40 percent increase during the past two years.

• While unemployment insurance provides a critical safety net for people losing jobs, unemployment insurance payments replace at most half of an unemployed worker’s previous wage. New York’s maximum weekly unemployment payment has been frozen at $405 since 1999, a lower level than all neighboring states.

• Credit remains highly inaccessible for New York’s small businesses, and business bankruptcy rates are running three times higher than three years ago.

  The emphasis added is quite critical: for all the loss of jobs on Wall Street, the job loss outside of Wall Street is five times higher.

  The rejoinder given by the conventional wisdom thinkers goes something like this: you have to count the "multiplier effect" of Wall Street incomes and tax receipts to really give the full view of the importance of Wall Street. There is some truth to this: when Wall Street profits are higher, then, tax receipts are higher and that is good for the people. And Wall Street incomes then spread through the economy–people who earn money on Wall Street spend it on Main Street.

  Here is the deep, and dangerous, flaw in economics and politics. How did we get these figures that contribute to the repetition of the "multiplier effect"? Somebody plugged in figures to an economic model.

  Which gets you foolish results. For example: the economic model will tell you that because say the average income on Wall Street is $300,000 a year and people will spend 15 percent of their income on health care, then, a loss of X number of Wall Street jobs will result in X number of lost jobs in the health care industry.

  The problem is that statistics and economic models don’t tell you about the real world in an industry where the top twenty-five hedge fund managers walked away with an average of $1 billion each for 2009. If you make $1 billion a year, you are not going to spend 15 percent of that on health care–certainly not when the alternative is a mansion in the South of France, a Monet or fourth yacht.

  Which bring me to the General Motors-Wall Street analogy. General Motors worked on a different model. Yes, CEOs were compensated too highly–but nowhere near the level on Wall Street. And, most important, because of UNIONS, GM workers–and workers throughout the auto industry–got a larger fair share of the money generated by the company, with decent pay, real pensions and real health care. And, as an aside, no, the auto industry’s crisis has little to do with those terrible "high" union wages or "gold-plated" benefits or even the quality of cars–it has been, and always will be, health care costs (and we did not solve that with the health care bill–but that’s another story).

  By contrast, Wall Street is essentially non-union. The regular people–secretaries, clerks–that the conventional wisdom promoters like to talk about do not have real pensions–and, now, thanks to their bosses, they have no pensions at all–and their pay is a sliver of the revenues cascading into the coffers of the Citibanks and Goldman Sachs’ of the world.

  So, here is the bigger challenge. We should be cutting down the size of Wall Street (breaking up big banks, for example, and reinvigorating the community bank model)–and putting Wall Street back in its proper place–even if the 2008 crisis had never happened. Because Wall Street is central to the larger crisis we face in the country.

  Let us be clear up front. There is a critical role that financial services–banks, in particular–play in our economy. Small businesses need access to capital. Individuals need loans to pay for college, cars and homes.

  But, over the past 30 years, Wall Street’s growth was fueled largely by leveraged buyouts and financial schemes that were a persistent, regular attack on the economy and on the American Dream: hundreds of thousands of jobs–many good paying jobs with decent benefits–were vaporized not because it made for a better business model but because there were short-term profits to be made. Corporate CEOs boosted the stock prices of companies–stocks rose because Wall Street blessed such behavior–and, then, made out like bandits when their value of stock options rose. And Wall Street pocketed huge fees and commissions.

  Wall Street was the significant driver behind the failed so-called "free trade" model. The Wall Street mentality was simple–profits don’t come from making loans to Main Street. The real money is helping big corporations expand around the world, lowering wages everywhere and shredding any national barriers to the invasion of capital and investment.

  So, while it is right to criticize the creation of a pyramid of derivatives and the greed that drove the most recent asset bubble, built on a succession of lies and scams perpetrated on the American people, we will not change much if we don’t cut the cancer out of the fundamental business model that is undermining the standard of living for most Americans.

  This was, and is, a den of thieves.

  To compound the problem, we have political leaders who are entirely in the pocket of Wall Street. The torrent of money flowing into the pockets of politicians–and my opponent is the leading Democratic Senator pocketing money from Goldman Sachs–is designed to do one thing: buy votes and make sure the basic Wall Street model does not change.

  And that is not acceptable.