Say What?

We were pulled up short when a financial expert on a national radio show put forth the most nonsensical causal scenario for the 2008 economic collapse imaginable. It began with, “As we know, the cause of the collapse” –as if to imply that what followed was verifiable fact, set in stone. Actually what followed was nonsense. It was an effort by the reckless too-big-to-fail banks to shift the blame for their disaster to, well, anyone but them. It was even less plausible than the ongoing effort to pin the economic train wreck on some imaginary Clinton era mandate forcing banks to knowingly lend to people who they knew would never be able to repay the loans. Right; and even if this pipe dream were true, would it have taken eight plus years for those mortgages to sour?

While Bill Clinton had a role in running our economy off the cliff, it had nothing to do with any mortgage mandate. In 1999 Clinton signed into law a bill repealing the Glass-Steagall Act that had protected us from this kind of nonsense for sixty plus years. So Clinton played a minor part in passing a bill nicknamed the “Citigroup Relief Act.” At the time, Congressman John Dingell argued on the House floor that this bill would result in creating “too-big-to-fail banks and that should they get into trouble taxpayers would have to bail them out.” With help from another ill advised law, the 2000 “Commodity Futures Modernization Act” exempting the banks and others from State gambling laws it took less than a decade for Dingell’s prophecy to play out.

First let’s get things straight. While there are minor players in the 2008 tragedy, the too-big-to-fail banks bear 99.99% of the blame. Had they not been on the brink of failure, in need of a taxpayer bailout, there would be no recession. They put themselves in this position by bundling mortgages that they referred to as “Crap,” strong-arming the rating services into stamping them AAA, and selling them to anyone dumb enough to buy them. These banks pushed the little folk in the mortgage pipeline for more and more sub-prime mortgages until the whole house of cards collapsed. Everyone got hit, including some of the too-big-to-fail banks, and just as John Dingell predicted we had to bail them out. That left the big banks in good shape and the rest of us literally holding the bag; an empty bag.

So what are the Wall Street bankers up to? Why this propaganda campaign to shift the blame for the horrific recession we are still struggling to overcome? That is pretty clear. They are engaged in the same risky stuff that got us into this mess in 2008 and they want to keep right on doing it. Ethics be damned, they think that pouring millions into the pockets of the Washington crowd will stave off sensible regulation like the Volcker rule. They may be right; an outrageous lie combined with the big bucks may do it in an election year.

Let’s hope they’re wrong.