Saturday, December 05, 2009

Elizabeth Warren: "We Rescued at the Top, and Sort of Left the Bottom to Fend for Itself"



Elizabeth Warren sums up the bailout of the banks beautifully. We bailed out those at the top and left the middle class to fend for themselves.

While the middle class has been caught in an economic vise, the financial industry that was supposed to serve them has prospered at their expense. Consumer banking -- selling debt to middle class families -- has been a gold mine. Boring banking has given way to creative banking, and the industry has generated tens of billions of dollars annually in fees made possible by deceptive and dangerous terms buried in the fine print of opaque, incomprehensible, and largely unregulated contracts.

And when various forms of this creative banking triggered economic crisis, the banks went to Washington for a handout. All the while, top executives kept their jobs and retained their bonuses. Even though the tax dollars that supported the bailout came largely from middle class families -- from people already working hard to make ends meet -- the beneficiaries of those tax dollars are now lobbying Congress to preserve the rules that had let those huge banks feast off the middle class.

Pundits talk about "populist rage" as a way to trivialize the anger and fear coursing through the middle class. But they have it wrong. Families understand with crystalline clarity that the rules they have played by are not the same rules that govern Wall Street. They understand that no American family is "too big to fail." They recognize that business models have shifted and that big banks are pulling out all the stops to squeeze families and boost revenues. They understand that their economic security is under assault and that leaving consumer debt effectively unregulated does not work.

Families are ready for change. According to polls, large majorities of Americans have welcomed the Obama Administration's proposal for a new Consumer Financial Protection Agency (CFPA). The CFPA would be answerable to consumers -- not to banks and not to Wall Street. The agency would have the power to end tricks-and-traps pricing and to start leveling the playing field so that consumers have the tools they need to compare prices and manage their money. The response of the big banks has been to swing into action against the Agency, fighting with all their lobbying might to keep business-as-usual. They are pulling out all the stops to kill the agency before it is born. And if those practices crush millions more families, who cares -- so long as the profits stay high and the bonuses keep coming.

America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security. Going to college and finding a good job no longer guarantee economic safety. Paying for a child's education and setting aside enough for a decent retirement have become distant dreams. Tens of millions of once-secure middle class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff.

America without a strong middle class? Unthinkable, but the once-solid foundation is shaking.
That's why it's so sickening to listen to those same bailed out bankers now threatening to resign unless they are allowed to continue their obscene bonus culture.

They are simply not living on the same planet as the rest of us.

5 comments:

Steel Phoenix said...

It was worse than that. We taxed the poor to bail out big banks so they could lend us our money back at interest.

This s what you get when you let politicians decide how to spend your money.

nunya said...

Ahhh, if only the Am Govt had more people in it like Ms. Warren. *sigh*

Kel said...

This is what you get when you let politicians decide how to spend your money.

I'm not sure the politicians a were the villains here, SP, the bankers own that role. Or rather, the politicians should never have allowed the banks to gamble our money in the way that they did through excessive deregulation.

Nunya, I also think her perspective would do well to be emulated.

Steel Phoenix said...

Banking was optional, the bailout wasn't.

It wasn't the bankers who wanted to make high risk loans to people who couldn't afford it, for that look to Jimmy Carter's Community Reinvestment Act, to Reagan's Alternative Mortgage Transactions Parity Act, and Clinton's demand that HUD keep 50% of their portfolio in low income loans.

The big bailouts went to government sponsored entities, which held only a hundred million in total assets to back up five trillion in loans.

About all you can really blame bankers for in all of this is bundling risky loans and selling them to investors in a last ditch attempt to stay afloat with all their bad debt, which I suppose s what irritated those of you across the pond, since that's where you came in, as buyers.

Kel said...

About all you can really blame bankers for in all of this is bundling risky loans and selling them to investors in a last ditch attempt to stay afloat with all their bad debt, which I suppose s what irritated those of you across the pond, since that's where you came in, as buyers.

That is what irritated us, and I don't speak as a buyer, I speak as someone who watched them almost bring down the entire worlds banking system due to their insatiable greed.

And what further annoys me is that they are still selling off these packages rather than accepting the risks and properly vetting the people to whom they are making these loans.

The financial calamity which would have ensued made the bailout inevitable. As I said at the time, I didn't want to give billions to bankers, but it was prefereable to the alternative. However, I did expect the government, having given the bailout, to make a repeat of such behaviour impossible. I am very dissappointed that they appear to be doing nothing to control the bankers worst excesses.