March 28, 2015
Fred Branfman on ‘The Big Short’
Posted on May 6, 2010
The November 2008 financial crisis is thus properly understood not as an aberration but the logical culmination of 30 years of incompetence throughout every sector of the U.S. economy. Those involved in the financial crash, as Eisman explains, included:
—THE FINANCIAL INDUSTRY: “The subprime mortgage loan was a cheat. You’re basically drawing them in by telling them, `You’re going to pay off all your other loans—your credit card debt, your auto loans—by taking this one loan. And look at the low rate!’ But that low rate isn’t the real rate. It’s a teaser rate.” Eisman also learned from the CEO of Golden West Financial Corp. that free checking “was just a tax on poor people—in the form of fines for overdrawing their checking accounts. ... That’s when I decided the system was really, `fuck the poor.’ ”
—THE FED: “Greenspan he viewed as almost beneath his contempt, which was saying something. `I think Alan Greenspan will go down as the worst chairman of the Federal Reserve in history. I’m convinced he knew what was happening in sub-prime and he ignored it, because the consumer getting screwed was not his problem. I sort of feel sorry for him because he’s a guy who is really smart and was basically wrong about everything.’ ”
—THE RATING FIRMS: “ `They’re underpaid. The smartest ones leave for Wall Street firms so they can help manipulate the companies they used to work for. There should be no greater thing you can do as an analyst than to be the Moody’s analyst. ... Instead, it’s the bottom! ...’ To judge from their behavior, all the rating agencies worried about was maximizing the number of deals they rated for Wall Street investment banks, and the fees they collected from them.”
—THE MEDIA: His assistant Danny Moses explained that “we turned off CNBC. It was very frustrating that they weren’t in touch with reality anymore. If something negative happened, they’d spin it positive. If something positive happened, they’d blow it out of proportion.”
Lewis sums up this saga of incompetence thusly:
“The people in a position to resolve the financial crisis were, of course, the very same people who had failed to foresee it. All shared a distinction: they had proven far less capable of grasping basic truths in the heart of the U.S. financial system than a one-eyed money manager with Asperger’s syndrome. … The world’s most powerful and most highly paid financiers had been entirely discredited; without government intervention every single one of them would have lost his job; and yet these same financiers were using the government to enrich themselves.”
And as for the financiers, so too for much of the rest of the top tiers of the American economy. The key question now is how long it will take the general public to realize that most of the entire private sector has failed, and that entirely new arrangements are needed—featuring strict regulation, bank nationalization where appropriate, greater worker control, public members on corporate boards and a national economic strategy prioritizing the interests of workers and citizens.
The immediate prospects are not promising. The Supreme Court decision will help elect Republicans, whose policies of less regulation, less taxes on the wealthy, and less help for those in need will profoundly deepen the economic and social crisis. Voters and tea partyers mistakenly supporting demagogic Republicans who most threaten their incomes and jobs will grow even angrier, as will workers throughout the economy as their suffering becomes increasingly intolerable, leading to ugly class division, and possible violence and police measures to counter them.
The key question, however, is what will happen over the longer run. As even the most obtuse are finally forced to realize we can no longer rely on a failed private sector, there will be mass support for new approaches. America’s last private sector failure ushered in an era of government intervention, featuring job-creation and safety net programs financed by taxing the rich, and strict private sector regulation. Today’s economic stagnation could create mass support for an even more radical “New Deal,” especially since it will be exacerbated by the aging of the giant baby boom generation. As 77 million boomers—and their low-earning children who be unable to support them—find U.S. economic decline affecting not only their quality of life but how long they get to live, there will be unprecedented demands for an expanding safety net.
As discussed in Theodore Roszak’s “The Making of an Elder Culture,” [To see Fred Branfman’s Truthdig review of the Roszak book, click here] a baby-boom generation fighting not only for its own survival but a wider safety net for all those threatened by economic decline could create the only rational and humane alternative to today’s mess: European-style welfare-state policies ensuring that the pain of America’s inevitable decline is shared equally, so as to maintain social cohesion and avoid disintegration into warring camps.
Whatever happens, however, one thing is sure. Cardiologists—and overpaid Wall Street bankers and CEOs, and the politicians who do their bidding—can maintain their present way of life only at the expense of everyone else. How soon the public wakes up not only to what Eisman calls the “rape” of the American economy by Wall Street, but the gang rape perpetrated by so many more of our economic and political leaders, will determine not only Americans’ economic well-being but the future of democracy.
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