I've been reading material that is surely no snooze: The report of the Financial Crisis Inquiry Commission, a horror story made worse by being true life. Here's the effect of the financial collapse of 2008 that led to our current "Great Recession:"
"As this report goes to print, there are more than 26 million Americans who are out of work, cannot find full-time work, or have given up looking for work. About 4 million families have lost their homes to foreclosure and another four and a half million have slipped into the foreclosure process or are seriously behind on their mortgage payments. Nearly $11 trillion in household wealth has vanished, with retirement accounts and life savings swept away.
"The collateral damage of this crisis has been real people and real communities."
The commission's charge was to determine how and why this collapse occurred, or "...how did it come to pass that in 2008 our nation was forced to choose between two stark and painful alternatives -- either risk total collapse of our financial system and economy or inject trillions of taxpayer dollars into the financial system and an array of companies [TARP bailout], as millions of Americans still lost their jobs, their savings, and their homes?"
I recommend reading their report at http://www.fcic.gov/. I'll not repeat all the conclusions here but, in sum, they found that the crisis was avoidable, was caused by the mortgage financing industry, investment banks and Wall Street, and was enabled by a regulatory system they politically and ideologically controlled. "There was a systemic breakdown in accountability and ethics" similar to the lead-in to the Great Depression.
Yet we don't hear much about this report from corporate-controlled media, do we? What we do hear is conservatives and libertarians pushing the same stale economic policies that caused this crisis. They have no solutions, only misinformation and attacks on the Democrats who DO have proven solutions that are working.
Somebody forgot the lessons in the movie "It's A Wonderful Life" in which community banker George Bailey discovered his positive impact upon his community. Let's hear it for the community banks! Most of them operate under the regulations enacted after the Great Depression. While making a reasonable profit, most of them handle our checking and savings accounts properly. Most handle our loans properly because they OWN our loans; if we default it hurts them too. So they don't engage in predatory lending to unqualified borrowers. They don't sell our loans to others. They don't speculate on Wall Street using invented securities. They're lending banks, not investment banks, and vital to our economy. Yet, when they do fail they are quickly restructured and put back on a steady course by the government.
It was the titans of our financial industry -- mortgage brokers, credit rating firms, investment banks, holding companies and Wall Street -- who engaged in "regulatory capture," whereby an industry takes political control of the regulatory agencies and corrupts the standards that protect consumers and the country. These financial titans did everything they were NOT supposed to do using a shadow banking system and artificial securities based on toxic mortgages that violated all reasonable safeguards.
To make matters worse they sold toxic investments around the world and, far worse, they lured elements of our safety net, retirement plans, to participate in the scheme with disastrous results. While most of us learned in kindergarten that rules help us live better lives, these people followed the myth that capitalism can operate properly without regulation. This myth persists today in conservative and libertarian calls for deregulation. With financial reform we made a few steps to rein in some but not all misbehavior; we got back much of the TARP bailout money but now the stock market is in another bubble. And conservatives want to go back to square one.
Few of the perpetrators have been prosecuted, but more may be. Note that few of the truly malfeasant were homeowners who defaulted on loans. And NONE were workers who lost their jobs. Yet conservatives would have us believe homeowners caused this crisis and that the unemployed purposely destroyed their own jobs so they could "bask in the glory" of temporary unemployment insurance at a fraction of their earnings.
We haven't slipped into another Great Depression. For that we have our safety net of social programs to thank. At the onset of the Great Depression we had no Social Security, no Medicare and Medicaid, few employee retirement plans, and no unemployment insurance. Wisely we put those in place to build the middle class in America and even out the ups and downs of the economy.
We now also averted a depression by government spending to stimulate demand while meeting known needs such as infrastructure. The loans -- they were NOT bailouts - to the auto industry were elements of that successful stimulus. Yes, these increase the debt some, but, here's another truth: Growing back the economy is the BEST way to pay down that debt.
Yet, hawking the myth that our debt is the major challenge we now face, conservatives demand that the safety net and stimulative spending be cut. Until we get the economy going and employment up, stimulative spending should not be cut and the safety net should be enhanced not reduced.
The truth is that most of our debt, over half of which is owed to our fellow Americans by the way, came first from the Bush tax cuts followed by two unpaid wars and a prescription drug benefit giveaway to drug makers. The next part of the debt came from spending to save the economy. None of that was caused by President Obama or the Democrats.
It's a blatant lie that Social Security is bankrupt. It's not even in trouble, has a $2+ trillion trust fund separate from the general fund, not part of the budget deficit. It has been the most successful program of its kind in history, never defaulted on benefits and is secure as is until 2037. The fund is invested in US Treasury notes, not Wall Street. Can you imagine what damage would have occurred had Social Security been privatized as conservatives want and its funds invested in this toxic soup of mortgage-backed securities?
All this conservative denial and misinformation begs the question: Are conservatives so intent on winning the next election that they would try to prevent our recovery from an economic crisis THEY created? Or have they too been "captured" by the financial industry to do its bidding? Bottom line: The financial industry should serve the people, not the other way around.
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