A few years ago when President Bush came on and told us that ‘the economy … broke in the middle’, somehow, it didn’t quite register with everybody. Mr Bush even said in the same speech that the key to solving the economic credit crunch – as it was known then – he said, was ‘liquidity’. Simply put, though I nor he is an economist, he meant by liquidity the ability of big banks to move assets and especially credit around.
Even now after years of talk and threats and more about deficits and medicare cuts, reforming or privatizing social security, budget cuts both federal and now deeper cuts to state and local budgets, the reasons why, for the public at large, seem still so elusive. After failures in every industry, due at first to lack of constant credit and then the failure of real estate-based mortgage-security financial products – that were no longer being paid, in many cases due to the loss of credit in the wider markets – people all over lost jobs and then their homes. It wasn’t only industries and individuals that were affected by the collapses from the loss of credit, though. These financial products also had chunks of state and municipal bonds in them, along with 401K and other pension plans, leaving cities, states and pensioners at a loss, with little recourse or recompense. So localities had to cut budgets after years, in the last decade of poor growth economically. And it’s worse in some areas than others, too. And yet, the credit markets have not returned to their former use as banks still don’t lend ‘like they used to here’ and nobody ever talks about it.
While some have tried the courts for justice and others resorted to the street and despite some attempts at reform in Congress with the Dodd-Frank Law a couple years ago and with the numerous suits by State AG’s over the last few years, those responsible for the failure of finance still elude culpability especially in the wider public discourse.
Liquidity became more like glue, but with nobody lending. As the credit markets were stuck and still left largely unstuck during these last long five years of continual assurances and hand-holding sessions from the WH, Treasury Dept and especially the Federal Reserve, that banks could sit at the discount window, be assured of quantitative easing periods of limited but open-ended duration and now what amounts to massive billion-$ write-offs that the GOV agrees to call fines.
It is just as damning since this general public dis- or unawareness of activity in central institutions, in turn, continues to further encourage basic flouting of responsibility for their actions in their own business activities. Now, even supposed punishments as meted out by government is pawned off in various dissimulations without the ring of or so much sting of apologies. They all have their lawyers, lobbyists and ad-makers who make the larger companies look the part of benevolent community builders on teevee but at home, we are led to believe any more such criminality or economic collapse is somehow thwarted or mitigated. This is no mitigation for the end-user clients seeking justice, just more giveaways to the banks for their errors.
I heard today from fatster here at FDL about the latest bank settlements. She directed me to articles from Yves Smith and a couple from David Dayen last fall. This is not enough context but will have to do for now. I am so disheartened by this inability of banking, government, mainstream media, or the law to get any of this right. Even this late mutated settlement wrapped in bunting they are showing off this week is just so tacky and uninspired. Because if this is how government is dealing out punishment to fraudulent bank practices, then what does that say about the entire capitalist system so many religiously devote their stores and ideologies on?
I don’t know what to do about it, I just had to write it down so it’s not entirely forgotten. If nobody is held responsible and nobody gets the blame then more of our nation’s wealth will get taken and we’ll be left waiting again next time for more frauds to loot us some more. I’m not an economist, but I bet even Bush could agree. That’s not the way capitalism is supposed to work.