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campaign finance reform

The Great Recession was Caused by Wall Street, Not All of Us

I just finished reading the memoir, Bull by the Horns by Sheila Bair, former head of the FDIC - which insures our bank deposits and is responsible for preventing more banking crises than you can imagine. It is a very good intro to how government regulators failed to stop the incredibly stupid gambling on Wall Street by irresponsible banksters.

A shorter article that overlaps some with the book is helpfully entitled, "No, Americans Are Not All to Blame for the Financial Crisis: Exposing the big lie of the post-crash economy" by Dean Starkman. He nails it and I plan to add his book to my reading list.

In the short article, he debunks the common sentiment that we are all to blame for the Great Recession.

The alleged responsibility that the average American bears for the crisis rests largely on the notion that people knowingly (key word) took out bigger, riskier loans than they could afford—and that they all decided to do it rather suddenly around 2004. Which, see, that’s crazy right there.


In 2010, an FBI report drawing on figures from the consultancy Corelogic put total fraudulent mortgages during the peak boom year of 2006 at more than $25 billion. Twenty-five billion dollars is obviously not nothing. But here again, teasing those mortgages out of that year’s crisis-related write-downs of $2.7 trillion from U.S.-originated assets leaves our infamous “cagey” borrowers to blame for only a tiny share of the damage, especially since not all of the fraudulent mortgages were their fault.

Bair's book touches on the notion that spurred the creation of the tea party - that the crisis was created by people who bought too much house. But a stunningly high number of home owners that got into trouble were people who simply refinanced their homes with a company that lied to them and basically committed fraud.

Michelle and I bought our house almost 5 years ago and refinanced it last year. We chose banks we believed we could trust because it simply is not possible for the average home owner to understand all the forms we have to sign. We did the best we could and trusted the bank to the do the rest.

In a modern country with basic oversight, that shouldn't put anyone at risk of losing their home but it did because the regulators failed. The lesson is not to get rid of the regulators but rather to reform our government so powerful interests cannot buy the laws they want to screw us.

Something that comes in the Starkman article reminded me of just how important race still is and how disadvantaged some populations remain despite the progress we have made over the past 50 years.

At the height of the madness, when subprime made up an insane 27 percent of the multitrillion-dollar home-loan market, nearly half of new African American mortgage holders found themselves in one. Black and Latino borrowers with credit scores of more than 660 were more than three times as likely to be in a subprime loan than their white counterparts.

The article finishes strong, reminding us why the narrative that "everyone is to blame" is so powerful.

Sorry, everybody was not to blame. “We” didn’t all do it. “Main Street” didn’t succumb to a new tulip mania, and cheap credit didn’t expose anything but the corruption and immorality of a financial industry that systematically put huge numbers of even credit-worthy borrowers into defective products. Cultural theorizing—especially the evidence-free kind—should be seen for what it is: an exercise in complacency. It’s easy. And it’s what you lean on when you don’t want to take on structural problems, the kind you actually have to do something about.

We didn't all do it. The truth doesn't always lie in the middle of competing claims. Sometimes you have to work to understand something and when you don't, democracy fails.

Why Wall Street Got a Pass from Democrats

Very good article from The New Republic: "A Wasted Crisis?" by Paul Starr. The subtitle is "Why Democrats did so little to change Wall Street.

He reviews several books discussing the Democratic Party response to the economic crisis and Wall Street, each of which I put on my reading list. All of it reinforces my very strong belief that if we do not reform the campaign finance system, our Republic will remain beyond our reach. Support the Rootstrikers!

From the Paul Starr piece:

Finance-friendly government has also resulted from the industry’s increased lobbying and political contributions in an environment where countervailing pressure from consumer groups is negligible. Even in the latest battle, the imbalance has been staggering. According to Kaiser, a consumer coalition in 2009 announced it would raise $5 million to support financial reform; in comparison, the lobbying expenditures by the finance industry in 2009 and 2010 totaled around $750 million. Wall Street political contributions, McCarty and his co-authors point out, have gone to both Democrats and Republicans, though not indiscriminately. “The more conservative wing of each party (moderate Democrats and conservative Republicans) garners substantially more contributions than the more liberal factions.” The finance industry is bipartisan in the sense that it pushes both parties to the right.

Former Senator and present lobbyist, Chris Dodd was a chief author of the effort to ensure Wall Street didn't once again kill our economy. From the article:

Dodd, whom Connaughton describes as “Machiavellian,” readily made concessions to Republicans who were not going to vote for the bill, while ignoring his own Democratic colleagues. “Dodd and the Treasury Department wanted a squishy bill,” Connaughton writes, “and the Republicans were willing to work with Dodd to weaken it.”

Where have we seen this before with Democrats? The stimulus is the first thing that comes to mind - where the stimulus was watered down and included major non-stimulative tax cuts to woo Republicans than never supported it. The problem is that Democrats can't even count on the middle-of-the-road Democrats to vote for a bill unless they give major concessions to Republicans who will never vote for it anyway.

And why is that? Probably because those Democrats come from districts where Republicans are far better at winning elections with deeply flawed talking points that nonetheless play well on television. So Democrats have to avoid doing anything that Republicans can easily demagogue (often by lying and recognizing no one will call them on it).

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