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What the hell's happening here? Why is my bank in the tank? And my house and job? And my retirement money? Even my state's teetering on the brink of broke! Who did this to us?
Fair questions, but we're not getting honest answers. Last year, at the first signs of the global financial slide toward the abyss, we were told that it's just a little hiccup caused by something called subprime mortgages. Not to worry, the Powers That Be declared confidently, for we have the damage contained. And rest assured that "the fundamentals of our economy are sound."
Then, this spring, Bear Stearns cratered, requiring an emergency federal subsidy to cover billions in bad loans. Okay, admitted those in charge, that subprime stuff actually is leveraged on up the financial system, and maybe there's been a bit of greed among a few of the big players, but we really do have the problem contained now, and, hey, "the fundamentals of our economy are sound."
But in September--Omigosh!--there went Lehman Brothers, Freddie Mac and Fannie Mae, AIG, Merrill Lynch, Goldman Sachs, Citigroup, WaMu, Wachovia, and others. Well, yes, conceded the now-frazzled financial establishment, but gollies, we're throwing hundreds of billions of your tax dollars into sandbags to contain the problem, and remember: "The fundamentals of our economy are sound."
In October, the contagion rolled through Britain, Canada, and Europe; it spread to Brazil and across to China and Japan; and--Holy Schmoly--suddenly all of Iceland was melting in bankruptcy! Stay calm, cried an openly panicked chorus of Washington officials, for we're holding some big summit meetings soon and consulting our Ouija boards, and...uh...ah...um...y'all just keep clinging to the thought that "the fundamentals of our economy are sound."
Laissez Fairies
You don't have to be in Who's Who to know What's What, do you? The fundamentals are NOT sound.
Wall Street and Washington (excuse the redundancy there) want us commoners to believe that this viral spread of economic grief was caused by those lower-income homeowners who couldn't pay their subprime loans--merely an unforeseeable glitch in a complex and otherwise healthy financial system. Hogwash. The source of today's pain is the same as it was in America's previous financial collapses: the unbridled greed of economic elites, enabled by their political courtesans in Washington.
This unbridling has been the long-sought goal of a cabal of deregulation ideologues who dwell in laissez-fairyland. During the past two decades, they have relentlessly pushed their economic fantasies into law. Their theory was that (to use Ronald Reagan's simple construct) "the magic of the marketplace" would create an eternal rainbow of prosperity through financial "innovation"--if only the market was unshackled from any pesky public regulations. What the dereg theorists missed, however, is that magicians don't perform magic. They perform illusions.
Let's meet some of the illusionists who are directly responsible for hurling you, me, America, and most of the world into this dark and as-yet unplumbed economic hole.
Phil Gramm
Snide, sour, and sanctimonious, this former senator from Texas is now head lobbyist for the Swiss-based banking giant, UBS, as well as chief economic adviser for his old chum John McCain. A bathed-in-the-blood, footwashing, free-market absolutist, Gramm advocates a virulent brand of antigovernment, market-knows-best, Rambo capitalism.
In 1999, as chair of the Senate Banking Committee, he had the power to implement some of his cockamamie dogmas. First, he pushed through a bill to dissolve the 1933 Glass-Steagall Act, a New Deal reform that prohibited banks, investment houses, and insurance companies from combining into one corporation. By keeping these components of our financial system separate, Glass-Steagall made sure that the crash of one of them would not bring down the other two. But a number of Wall Street banks, led by what would become Citigroup, saw a profit windfall for themselves if only they could scuttle the old law and merge banking, investment, and insurance into huge financial conglomerates. The senator was their ideological soul mate, and he was delighted to rig the system for them.
See more stories tagged with: economy, wall street, alan greenspan, bailout, phil gramm, henry paulson, financial crisis, chris cox, william donaldson
From "The Hightower Lowdown," edited by Jim Hightower and Phillip Frazer, November 2008. Jim Hightower is a national radio commentator, writer, public speaker and author of the book Swim Against the Current: Even a Dead Fish Can Go With the Flow. (Wiley, March 2008)
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