This is a good time to rent, or rent again, the film Inside Job, the best and most accessible (hey, narrated by Matt Damon) primer on the financial meltdown that caused the Great Recession. It’s a reminder of the feral greed, delusional thinking and risky rackets in operation at the most revered institutions, supported by the most respected economists, enabled by the regulators and juiced by highly regarded rating agencies.
Then consider how Elizabeth Warren, the genuinely honorable and brilliant advocate of a consumer protection office, which could have prevented the predatory but highly profitable practices that have ruined millions, has been tossed under the bus by President Obama. The same goes for Paul Volcker, the former Federal Reserve chief who tried to work with the president to rein in the financial sector. Don’t expect congressional Republicans to allow Obama’s choice in lieu of Warren, former Ohio Attorney General Richard Cordray, either.
The bad guys have won.
The Dodd-Frank Act, which the media persists in calling “sweeping reform,” is in fact weak and largely unimplemented. Its dismemberment is the goal of two dozen bills in Congress, where banking and Wall Street lobbyists have spent $50 million this year alone to have their way. Congress is also busy cutting the budget of the Securities and Exchange Commission.
Dodd-Frank does not break up the too-big-to-fail banks. Nor does it eliminate the securitization Ponzi schemes, go after perverse banker compensation, prevent commercial banks backed by the taxpayers from gambling in investment banking or seriously regulate the dangerous derivatives that were so responsible for the crisis reaching epic levels. No major figure behind the panic has been prosecuted, gone to jail or been forced to return the hundreds of millions in compensation they received as they were engaging in willfully reckless — but wildly profitable — practices. Ben Bernanke, in denial about the gathering storm until it was upon him, still has a job. The big brains that concocted the weapons of financial mass destruction remain at work, and the business professors and economists who gave an academic respectability to “free market” religion are still pulling down huge fees from the banksters.
Americans like the part of our myth of exceptionalism that justice is always done. Whether it’s a Western or a detective novel or GIs liberating Europe, the story ends with the good guys winning. Not this time. So if Mr. Obama’s “austerity” doesn’t drive the economy back into recession, just wait for the next financial crisis.
Today’s Econ Haiku:
Earth to Chicago
What have you been smoking there
As Airbus took off