In a week, the nation will celebrate the one-year anniversary of Wall Street’s collapse.
For most, it won’t be a festive occasion. A whopping 16% of Americans able to work are unemployed or are working fewer hours than they want. Spending is way down because people are scared and many are unable to borrow – lines of credit have been slashed and credit card interest rates are skyrocketing. Since household spending amounts to at least 30% of the nation’s economic activity, this has had a devastating ripple effect on the economy.
The economy tanked when the grifters on Wall Street got caught at their own con game and realized that – surprise! - they couldn’t trust each other. So they shut down the credit spigot until the Bush Administration agreed to give them $700,000,000,000 to “restore their confidence” and start lending again.
You could tell even before it happened that the Great Giveaway was going to be “the most expensive boondoggle of all time,” as I wrote on Monday, September 22, 2008, a few days after the Bush Administration proposed the bailout to Congress in a three-page draft. The next day, I flew to D.C. in what can only be described in retrospect as a ridiculously naive attempt to try to slow the thing down or at least get Congress to put some conditions on the deal – like requiring bailout recipients to cap interest rates. That was a waste of the airfare, I reported when I got back.
One year later, the bailout of the Money Industry has metastasized into a multi-trillion dollar morass that went to gifts, loans, loan-guarantees, and other assistance, almost all of it to banks, investment firms, insurance and credit card companies, the auto industry, even some rental car companies lined up for bailout cash. If you really want to fry yourself, the Treasury now puts out reports on its corporate welfare programs, but you won’t be able to decipher which companies are on the dole, or exactly how much of our money has been spent.
A much more useful look at what the government has been doing with our Money comes from the “Congressional Oversight Panel,” which Congress created as a gesture to accountability when it passed the bailout on October 3, 2008. To the credit of Senate President Harry Reid, though, the panel is chaired by someone who really knows how to follow the money: Harvard Law Professor Elizabeth Warren, an expert in financial and consumer protection law.
The outspoken Warren and her COP colleagues have been patrolling the Treasury Department and the executive suites of the companies that have received taxpayer cash, and the panel’s reports are both detailed and depressing. Her assessment of the bailout often confirms the public’s worst fears.
COP’s latest target is the bailout of the auto companies, which the Treasury Department subjected to far more conditions in exchange for public money than were imposed on the Money Industry. On MSNBC, Warren concluded, “I think the problem has been all the way throughout this crisis, that the banks have been treated gently and everyone else has been treated really pretty tough.”
The collapse of the financial system didn’t happen overnight – in fact, it took about ten years, as the Consumer Education Foundation’s report on the debacle explains. After year one of the rescue, it’s clear it will take at least that long for the nation to recover.