The Great Crash posed one question for this country: who would bear the losses? Would it be the banks that caused the problems? The officers, directors and shareholders of those banks? Their careless counterparties? The investors who bought the fraudulent real estate mortgage-backed securities and the complex spin-offs? The owners of capital who threw money into hedge funds and other exotic investments expecting a geyser of money in return?
No. That group doesn’t lose money. They used their control over the government and the Fed to make sure that the losses would be passed on to the rest of us, pushing millions into or near poverty. The savers were trashed by the Fed’s zero interest rate policies. The national debt run up by tax cuts and wars gave the rich an opportunity to end the safety net and focus all of the efforts of government on protecting them and their interests. The rich are safe. The rest of us are in deep trouble.
The government threw money at banks with abandon, leaving incompetent failed executives in place. When it turned out that banks lied about the quality of the notes and mortgages transferred to the RMBS Trusts, the SEC and the Department of Justice refused to investigate, let alone prosecute.
Banks didn’t complete the transfer of those worthless notes and mortgages into the Trusts, so the IRS announced it wouldn’t enforce the requirements for pass-through non-taxable status. The servicing arms of those banks cheated and lied to courts around the nation about ownership, and when they got caught, they talked the government into a sleazy settlement that gives nothing to the people damaged by the frauds and allows the banks to continue to lie and cheat, if at lower levels.
This list could be expanded indefinitely, with the same outcome: the Fed, Congress and the White House have only done those things that protected the money of the rich, whether or not the settlement was consistent with the law or not.
It didn’t have to be this way. From the outset, there were things that could have been done that would have placed the losses where they belonged: on Wall Street and its criminal denizens and its careless clients. The bailouts could have come with constraints and requirements, firings, lawsuits, and indictments. The entire rotten structure could have been pushed into a form that would not threaten the lives and incomes of the middle class, a group whose responsibility for the problems was minimal in contrast to that of crooked lenders and swindlers.
No. Not in this country. Not in a nation ruled by oligarchs and a government in thrall to economic theories years after those theories revealed themselves as nonsense, or to the rich who endow those irrational theories with sanctity of revealed truth, or both. There was never a day when the primary or even subsidiary consideration was the middle class, or the rule of law, or even the pretend values of the free market. The only consideration from the outset was the protection of the rich.
Even two years later, the government showed no interest in raising taxes on the richest Americans. Both parties explained that they couldn’t raise taxes even on the rich in a recession, and that the only solution was cutting out unemployment benefits, lowering the minimum wage, slashing Social Security and Medicare, and removing people from Medicare and the shredded remnants of help for the worst off.
The current lousy economy is a result of deliberately chosen policies. The government could have chosen policies that would have protected the middle class at the expense of rich criminals and their clients and their hedge funds and their off-shore trusts and their tax-avoidance schemes, the people and entities that wrecked the economy. It didn’t.
It’s not that we don’t know what to do to make the economy work for the middle class. We do. The government and the elites and the rich won’t allow it. They go house to house, from Bangor to Bakersfield, saying to the inhabitants, What part of this sentence don’t you understand? You think we’re going to eat our losses? You think we don’t care about our money? Well. Suck. On. This.