Ten Years After


Ten years ago the US stock market tanked, and for the next several weeks financial markets were a cluster-fuck of panic and chaos. Americans were frightened of what was happening in the economy. The real estate market had collapsed. Venerable Wall Street firms Bear Sterns and Lehman-Brothers vanished.

Federal Reserve Chair Ben Bernanke, Treasury Secretary Henry Paulson, and Federal Reserve Bank of New York President Timothy Geithner, rushed to Congress to plead for $700 billion to bail out the banks. They argued to lawmakers that without the bailout, the United States faced a catastrophic collapse of the financial system and a second Great Depression. Bernanke was hyperbolic. “If we don’t do this today we won’t have an economy on Monday.”

It was a big lie. The prospect of a modern repeat of the Great Depression was just a scare tactic used by Bernanke, Paulson and other proponents of the bailout to get the political support needed to save the Wall Street banks and their bondholders.

Meanwhile, millions of Americans suffered through the Great Recession, losing homes and jobs. 9 million homeowners were turfed-out. Saving the banks became the priority of the president and Congress. Saving people’s homes and jobs mattered much less or not at all.

Today, Ben Bernanke, Hank Paulson and Timothy Geithner insist they did what they had to under conditions of extreme pressure. Mistakes were made, the government’s former top financial overseers acknowledge in a recent piece for The New York Times, but they did ultimately “prevent the collapse of the financial system and avoid another Great Depression.”

Except here’s the thing. They didn’t really rescue the financial system. They transformed it into an unaccountable criminal syndicate. Too-Big-To-Jail. For example, in the years since the crash, the biggest Wall Street banks have been caught laundering drug money, violating U.S. sanctions against Iran and Cuba, bribing foreign government officials, making illegal campaign contributions to a state regulator and manipulating the market for U.S. government debt. Citibank, JPMorgan, Royal Bank of Scotland, Barclays and UBS even pleaded guilty to felonies for manipulating currency markets.

When poor people engage in such activity, we call it looting. But for the bankers and their minions at the Fed and the Treasury, this was described as saving the economy.

Not a single banker has served a day in jail for any of it.

It could have been different. When Obama took office, he promised to hold bankers accountable and to spend up to $100 billion from the bank bailout to prevent foreclosures. He ultimately spent just $21 billion. But the dollar amount was only a fraction of the failure. The bailout gave the government unprecedented authority over the foreclosure process ― it could have required banks to adjust monthly payments or reduce debt burdens for homeowners in distress. Instead, as Geithner put it, the foreclosure relief plan was designed to “foam the runway” for banks coming in for a hard landing. This, crucially, allowed banks to slow down the pace of foreclosures, but did not actually help families keep their homes.

One theory posits that Mr. Obama’s decision to forego prosecution of Wall Street executives for crimes that led to the financial meltdown of 2008 and the Great Recession that followed was motivated by class-sympathy— they were his friends, acquaintances, campaign contributors and school-mates. Of course, Obama’s class-sympathy also came with a big payday. Since leaving office Mr. Obama has enriched himself giving speeches to those he failed to prosecute and that senior members of his cabinet returned to lucrative careers working for or otherwise representing the interests of Wall Street firms. This is participation in plunder, not sympathy.

Politics is about who wins vs who pays the costs. The bailout and the ten years since have provided a sobering view of this dynamic. Ultimately, the crash and bailout led to a breakdown and a lack of trust in institutions. It raised a lot of questions about who controls society ― banks or the elected government.

Looking back, what’s so infuriating is that there was a blueprint for a different course of action. In the wake of the Great Depression a wealthy president and enough of the members of his class realized that the only way to stop the rising spiral of depressions that threatened to end here, as in much of Europe, in fascist takeovers was to allow a much larger share of the national wealth to go the working classes.

Today there seems to be no such awareness among our elite. They talk about the brutal, merciless, sink or swim economy as if it were inevitable, beyond anyone’s control. But collapsing economic security is not inevitable. It is the direct and intended result of elitist policy, designed, built, and maintained by the people at the top: the CEOs and the Wall Street bankers, and of course their political puppets in congress, the executive branch and the courts.

Trump is the result of this elite malfeasance. Americans growing sense of economic insecurity is the primary force behind the populist surge, and it is the reason voters in 2016 rejected the mainstream elitist candidates in both the Republican and Democratic parties. The reality of mass economic insecurity must be confronted for the grave and long-standing crisis that it is. This is why we’re in a populist period, and why populism won’t be going away anytime soon.



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