(cross-posted from Newsvandal.com)
Language matters.
And right now, we are in the midst of an epic word game.
The name of this game is “crisis.”
First it was the “Financial Crisis.” Now it is the “Foreclosure Crisis.”
But the word “crisis” doesn’t even begin to tell the story of what happened, or what continues to happen, in America’s maelstrom of financialization, debt-trading trickery and asset hoarding.
This is not a “crisis.” This is a “scandal.”
Understanding the difference between the two is essential:
- A crisis is organic—a mere byproduct of the business cycle and bad decisions.
- A scandal is man-made—a scheme concocted to produce specific outcomes.
- A crisis is hard to control—a natural process that must be managed as best we can.
- A scandal is hard to cover-up—a game of tactics designed to hide tracks and shirk blame.
- A crisis is just bad fortune.
- A scandal is a criminal act.
This “Great Recession” has been a scandal from day one.
It did not happen organically, nor was it just a matter of circumstance or the business cycle. It was a well-played game of slick mortgage salesmanship, cheap money lent, bad debt sold, insurance bets hedged and the whole system played like a golden harp.
The fact that so many reaped profits by betting against the market and their clients, thus making money on both the blowing and the popping of the bubble, belies the artful framing of the financial crash as a mere “crisis.” Both Wall Street and their cozy compadres in Washington worked hard to minimize the “scandal” and play up the “crisis.” To this day, the “asset hoarding” phase of this epic scandal is widely referred to as the “Foreclosure Crisis.”
This is where we need a stiff dose of American history.
Why? Because it happened before.
The Savings and Loan Crisis (1987-1994) became a “scandal” of epic proportions, ensnaring members of Congress, dropping the country into a nagging recession and leading to a massive bailout that eerily portended the coming of the Great Recession.
Back then, the initial crisis quickly turned into a scandal as the public witnessed scenes of pensioners lined up at rapidly collapsing “thrifts” and S&L “banks” in a mad scramble to withdraw what may or may not have been left of their life savings.
Back then, those scandalous S&Ls were not too big to fail or jail.
The how and why of the S&L mess reads like a playbook, one later employed by Wall Street wizards passing quietly through the revolving doors of successive presidencies.
It all started with Reagan Era deregulation and “tax reform.”
In 1982, he signed the Garn-St. Germain Act, which further removed the wall separating risk-taking S&Ls and traditional banking. At the signing ceremony Reagan even remarked, “All in all, I think we’ve hit the jackpot.”
Did they ever!
It stoked a go-go building boom, bad investments and wild speculation. During Clinton and then Bush, the end of Glass-Steagall, artificially low interest rates, artificially high returns and lax enforcement improved upon that model.
Then as now, the financial class targeted the wealth of the middle and working classes.
In the 1980s, people poured money into Certificates of Deposits, drawn in by interest rates that seem outlandish by today’s standards. From 1981 through to the beginning of the crisis, rates even spiked to over 17%. Mostly they fluctuated between 6% and 10%. The promise of big returns gave newly deregulated institutions tons of cash to play with. Like kids rolling the dice in Monopoly, they invested it wildly—houses, office buildings and office parks. Later, financiers used the 401k frenzy, reckless mortgage lending, another go-go housing boom and a massive flood of consumerized credit to separate middle and working class folks from their wealth.
Ultimately, it all crashes. All that speculation is inherently unsustainable. They learned that during the ’80s and leveraged it in the ’00s. As the market hits the ceiling, gamblers start hedging their bets and cashing in their chips. But they know the game is rigged. Political allies quickly plan easy escapes, funding bailouts that set the scene for the real killing—taking cash on hand, or put in their hands by bailouts, to go on a spending spree, buying up the assets they initially helped to build up, but at a massive, post-crash discount.
Back then, the government sold off “toxic” assets through the Resolution Trust Corporation. Sometimes the very people who issued the risky loans at the S&Ls simply turned around and gorged themselves in the post-crash feeding frenzy, buying up those defaulted-upon buildings, office parks and even office furniture for pennies on the dollar.
In some ways, the “asset hoarding” phase is the whole point.
Unlike today, bad press and scandal dogged many of the S&L’s big players, including the Where’s Waldo of hyper-connected hi-jinx—Neil Bush. And yes, some bankers even went to jail!
Obviously, the financial class learned from history, unlike so many of their victims.
Perhaps that’s why this time they’ve avoided the scandals, even as the “asset hoarding” phase continues unabated. Right now, private equity firms, investment funds, big bankers and speculators of all stripes are using the “Foreclosure Crisis” to gobble up cheap, vacant homes around the country. While Wall Street and corporate profits climb ever higher, a new class of mega-landlords is emerging from the rubble of the so-called crisis.
This Leona Helmsley Clone Army is on the march, often populated by the very people who made the “lending mistakes” in the first place. And why not? They made the money on the upside. Cashed in their hedge bets on the downside. And then got the poor sods known collectively as “the American Taxpayer” to lend them the cash they needed to speculate and merge like mad during the hyped-up misdirection of the “crisis.”
Forgetfulness is the mother’s milk of America’s version of the business cycle.
And the fact that they’ve successfully socialized the costs of this scheme by framing it as a collective “crisis” is the biggest scandal of all.
Photo from Jeffrey Turner licensed under Creative Commons




5 Comments

1980′s S+L scandal led to late 1990′s LTC scandal which less than a decade on was scaled up in all ways which led to 2008 meltdown. Who is going to jail? B.H.Obama seems to not mind that no one is. Jail Obama as he is not doing his job. Why not? Is Obama not accountable? Obama cannot be held accountable? Why the hell not? Obama does not pass smell tests again and again. Put Obama in jail — send a message to Wall St. and WashingtonDC.
Thanks JP Sottile … commended
Ahhh yes, the S&L scandal of the 80s. How could we forget Neil Bush of the Bushc crime family was a major player in that fiasco. Remember Silverado S&L? Wonder what he’s up to these days. Don’t hear too much of him do you.
And let’s level our expectations here. We have a Justice Dept that would rather pursue Lance Armstrong than go after the crooks on Wall Street. Now, which had the bigger impact to you and me and biggest risk to our economic and social well being?
•A crisis is organic—a mere byproduct of the business cycle and bad decisions.
•A scandal is man-made—a scheme concocted to produce specific outcomes.
•A crisis is hard to control—a natural process that must be managed as best we can.
•A scandal is hard to cover-up—a game of tactics designed to hide tracks and shirk blame.
•A crisis is just bad fortune.
•A scandal is a criminal act.
Nothing is truer than what you stated here. We have been criminally robbed in more ways than one. I’m sorry I don’t see the direct money connection in the “foreclosure crisis”, I only see pure “depravity”, and here is why: First of all, everyone has succumbed to the talking points; “This is a real estate bubble”. That’s the biggest lie that’s ever been told, yet, everybody believes it.
This is why that’s such a big lie. If all of those homes had “fixed rate” loans as in the past, none of them would have been foreclosed that were the result of increased mortgage payments. Ben Bernanke could have raised the interest rate to the moon, and none of the people already in their homes would have been affected one iota, because they would have had “fixed rate” loans, as opposed to that Adjustable Mortgage Rate crap. Their mortgage payments would have remained the same as the day they signed the loan with a fixed rate. I’m sure no one would agree to payments they couldn’t make on the day they signed the loan, but if those same payments they agreed on, on that day doubled, how on earth could they pay them?
When Ben Bernanke raised the interest rate, this was just after he got that job; someone told him to raise the rate. There was no need for a rate increase what so ever; as a matter of fact, for the good of the economy, it should have been lowered at that time. Any “moron” could have foretold what was going to happen with all of those “ARM’s” floating around.
Those foreclosures affected everyone in this country, they reduced the value of your home, even if it was paid for. When you combine that “depravity” with the manipulation of the commodity markets we have DEPRAVITY on top of DEPRAVITY.
I’m going to ask everyone a common sense question, “If you paid at most, just a little over $1.00 a gallon of gas for your entire life, why did it all of a sudden go to $3.50 and more per gallon. That increase, plus the increase in the price of food, cost the average family $350. more a month to live. Politicians and rich people don’t even notice an additional $350 a month, but that’s like a ton of money to people just barely getting by. Since a person can not live without food and gasoline, they have had to forsake other necessities, like “health care” for example. As I am writing this, I need a dentist so bad it’s a crying shame, but unlike a lot of others, I know why I’m suffering, and I’m prepared to stand on my head in a bucket of shit, for the rest of my life, until I make everybody wake up and realize why they are suffering.
Go to this website and see how they robbed you with the help of commodity market manipulators, and this administration is the last administration in living color, no redneck jokes necessary. http://wp.me/p2vRlu-4
Neil is now heavily involved in the privatization of education, he is involved with corporate testing to show that public education fails, curriculum and on-line schools, taking advantage of the opportunities that Barry and the Dims have provided. The more things change……
Excellent! Thank you, JP Sottile!
Your work reminds me of the wonderful PBS program, “Connections.”
You also demonstrate the full subversion of our language re calling scandals: “crisis” –similar to my outrage at calling the BP Gulf of Mexico disaster an “oil spill.”
I continue to be insensed at hearing everyone referring to corps as “companies.”
A true company has human owner/operators that are directly involved in its success or failure in delivering a product or service.