What has been extraordinary to watch over the past 30-40 years is the way in which, when economic crisis strikes, the political and economic leadership of the country leaps into the breach to lend a hand–not to the regular people who suffered the most but, rather, to the very institutions and economic elites who caused the crisis.
No real wage increases for 30 years to put money in the pockets of millions of workers? No biggie–let’s give huge tax breaks to the very rich and corporations.
Savings and loan debacle? Pshaw…bailout the S&L industry.
And, in more recent times, criminal and moral financial manipulation leading to a global financial meltdown costing millions of jobs and vaporizing trillions of dollars in wealth? No need to sweat–trillions of dollars appear magically to save the asses of a small elite, who have not gone to jail and mostly still have their high-paycheck jobs.
Regular folks? Forgotten.
Which is the point of Gretchen Morgenson’s column today.
Over a long period of time, Morgenson has really been one of the lone stars in the industry of transcribers of press releases (once a profession known as "journalist") in digging open the misdeeds of the financial manipulators on Wall Street and in business (though I do quibble with her somewhat narrow focus in hew new book on Fannie Mae as the source of the financial implosion).
Today, she writes in a column titled "The Rescue That Missed Main Street":
FOR the last three years we have been told repeatedly by government officials that funneling hundreds of billions of dollars to large and teetering banks during the credit crisis was necessary to save the financial system, and beneficial to Main Street.
People, though, have been skeptical that the bailouts, particularly the money coming from the Federal Reserve Board, have been aimed at helping the average person. Referring to a Bloomberg News report, Morgenson writes:
For instance, its report detailed the surprisingly sketchy collateral — stocks and junk bonds — accepted by the Fed to back its loans. And who will be surprised if foreign institutions, which our central bank has no duty to help, receive bushels of money from the Fed in the coming months? In 2008, the Royal Bank of Scotland received $84.5 billion, and Dexia, a Belgian lender, borrowed $58.5 billion from the Fed at its peak.
Walker F. Todd, a research fellow at the American Institute for Economic Research and a former assistant general counsel and research officer at the Federal Reserve Bank of Cleveland, said these details from 2008 confirm that institutions, not citizens, were aided most by the bailouts.
“What is the benefit to the American taxpayer of propping up a Belgian bank with a single New York banking office to the tune of tens of billions of dollars?” he asked. “It seems inconsistent ultimately to have provided this much assistance to the biggest institutions for so long, and then to have done in effect nothing for the homeowner, nothing for credit card relief.”
Mr. Todd also questioned the Fed’s decision to accept stock as collateral backing a loan to a bank. “If you make a loan in an emergency secured by equities, how is that different in substance from the Fed walking into the New York Stock Exchange and buying across the board tomorrow?” he asked. “And yet this, the Fed has steadfastly denied ever doing.”
If these rescues were intended to benefit everyday Americans, as Mr. Paulson contended, they have failed. Main Street is in a world of hurt, facing high unemployment, rampant foreclosures and ravaged retirement accounts. [emphasis added]
Government officials rewarded imprudent institutions with stupefying amounts of free money. Even so, we are still in economically stormy seas. Doesn’t that indicate that it’s time to try a different tack?
The obvious answer is "yes". But, I think this column would have been more useful had it made the following links and observations:
People are correct: most of the money to save the banks did not benefit them in the long-term because
(a) the banks did not use that money for loans to regular people and;
(b) the people who created the mess were not forced to resign, in large numbers, and were never prosecuted and;
(c) the Obama Administration was simply happy to impose meaningless financial fines on companies so the lesson was: you screw up and crater the economy, we’ll slap your hands and let you continue to enrich yourself and;
(d) when an attorney general attempts to make sure the right thing is done, he is big-footed by the Administration and Federal Reserve directors who tell him to get with the program and;
(e) most of the "reforms" of the system are really meaningless–even though the industry is doing everything possible to undermine Dodd-Frank.
But, here is the real insanity. While turning over trillions to banks, a bi-partisan consensus emerged that captured the political machine in a foolish obsession abouta non-existent deficit and debt "crisis"–rather than open up the spigot to deal with the real crisis: J.O.B.S.
So, when one in five Americans cannot get decent-paying, full-time work, and, yet, they read about the financiers partying it up with politicians, it’s no wonder that people are skeptical that anything that was done was about them.
The only surprising thing, to me, is why the streets are not filled with people.