Various web links looking back on the tenth anniversary of the 2008 Financial Crisis
This is the shape our recovery has taken: some bailouts, some fines, some giving, and a net transfer of wealth from the many to the few. Is it any wonder that our political discourse is angrier, fringier, and more paranoid than at any time in memory? The stark fact about the financial crisis ten years on is that, in retrospect, it was a good deal for many of the people who caused it. Imagine what might have been: a recovery in which homeowners and indebted students had won relief from their loans, in which banks had agreed to pay a fairer share of taxes in exchange for the bailout help, in which they had been required to pump more of their capital into the real economy instead of swilling it around Wall Street. But none of that was to be, because, as the e-mail shows, a little bit of generosity could be put forward as a plausible substitute for justice. Giving in millions has a way of erasing harm done in billions.
The aftermath produced a lost decade for European economies and helped lead to the rise of anti-establishment political movements here and abroad.
In "Crashed: How a Decade of Financial Crises Changed the World," the Columbia economic historian Adam Tooze points out that we are still living with the consequences of 2008, including the political ones. Using taxpayers' money to bail out greedy and incompetent bankers was intrinsically political. So was quantitative easing, a tactic that other central banks also adopted, following the Fed's lead. It worked primarily by boosting the price of financial assets that were mostly owned by rich people.
Timothy Geithner's refusal to obey his boss has had long-term political and economic consequences.
According to credible accounts, Geithner slow-walked a direct
presidential order to prepare the breakup of Citigroup, instead
undertaking other measures to nurse the insolvent bank back to
health. This resistance to accountability for those who perpetrated
the crisis, consistent with Geithner's demonstrated worldview,
had catastrophic effects-including the Trump presidency itself.
...
Any objective look at Geithner's actions in response to the
financial crisis confirms that he would maximize his power on
behalf of big banks, even if it meant going around his colleagues
and his president. That included paying off AIG's investment bank
counter-parties at 100 percent instead of forcing a discount, or
blocking Bair, the FDIC chair, from forcing higher capital rules
on banks. Every action fit Geithner's worldview: The financial
system must be stabilized at all costs, as the only way to heal
the economy so real people benefit. "We do not need to imagine
that he was in the pocket of any one bank," Adam Tooze wrote in
the new book Crashed. "It was his commitment to the system that
dictated that Citigroup should not be broken up."
But this neglects the political implications of deploying massive resources to save Citigroup and Wall Street more broadly. Failing to hold anyone accountable for causing the Great Recession as the economy struggled to regain its footing generated significant public resentment, from the Tea Party on the right to Occupy Wall Street on the left. The same urgency and ingenuity was simply not adopted to save homeowners drowning in mortgage debt, which weighed down the overall recovery. Obama fired the CEO of GM, but no bank executive suffered for a moment. And people noticed.