Back in the summer of 2008, a friend of mine who had been working for some years on Wall Street called me and we began discussing the Bear Stearns collapse. At this time he had left Wall Street, but was very privy and astute to the workings of Wall Street and the economy as a whole. He warned me that Bear Stearns was the tip of the iceberg and we had not seen the worst of the unfolding crisis. Boy, was he ever right. On September 18, the day before my birthday, the Lehman Brothers fiasco hit the front pages and the great bailouts flew into high gear. My talks with my friend and then the AIG pending bankruptcy put a film idea in my head. I could not wrap my head around why banks and insurance corporations were getting bailed out after I started to learn about the evil that credit default swaps were. I figured, why couldn't I lobby for a bailout for my fellow citizens that had been snookered by these sociopaths on Wall Street?
I decided to take this project to a few filmmakers and production companies that I knew, and didn't get the responses I was hoping for. There were three responses I received: a. the bailouts were the right thing to do, b. we need to support incoming President Obama and c. I don't know what you are talking about. These three responses say a lot about the prevailing attitudes about the financial crisis in America. I was finding that Americans had apathy, a commitment to partisan politics and rigid resolution to the financial crisis. This experience really confused me and had me thinking that our country was heading into dark times. My concept of showing how financial bailouts for the common citizen would be better than bank bailouts died on the vine.
The reasoning for this concept was simple. In 1929, the Great Depression started and I wondered why we didn't look to FDR and The New Deal as the example to pull us out of our economic quagmire. The problems of 1929 and 2008 were different but the nature of the solution was right. The New Deal did not alleviate the Great Depression completely but it did help with the largest pressing problem. Unemployment was 25 percent and FDR instituted public building programs like the CCC (Civilian Conservation Corps) that helped put people back to work and build the nation's infrastructure. Furthermore, FDR instituted the Securities Exchange Act and the Glass-Steagall Act to regulate speculation that caused the Great Depression. These regulations would later be eased starting with Reagan, then upheld and eased by other administrations. It seems the short term memory Americans inherently have for history proved itself once again.
The argument I make for a citizen bailout is quite simple. The banks should have been forced to forgive debt to citizens that were being buried by the sub-prime scam. The Great Depression's greatest problem was unemployment; the current crisis is debt and income inequality. The reasoning is simple. If these citizens have their debt forgiven, they will once again start spending and fuel the sputtering economy. The bailouts only helped the banks, buried Americans further in debt they will never payoff, and froze economic growth. A case in point: Iceland. Since the end of 2008, Iceland's banks have forgiven loans equivalent to 13 percent of its gross domestic product. This has eased the debt burden for one quarter of the population. Iceland's economy shrank 6.7 percent in 2009, but grew 2.9 percent last year and will grow another 2.4 percent this year. I think we can learn a lot from our Viking friends in Iceland and also Sweden. Sweden handled their crisis with common sense in the early 90s. The Swedish government guaranteed all deposits and creditors within the banking system but did not rescue the equity holders. The banks were forced to write assets down to their true value before they received relief. This left the banks on the hook for their toxic waste that polluted the economy. It was the same problem we have, and the Swedes came up with a sensible solution. Of course, Americans have dismissed these countries as socialist and therefore they cannot possibly be the source of a true solution worthy of our system.
The other problem we have after these shortsighted bailouts is that nothing has been put in place to prevent these banks from fleecing the public again. President Obama was handed the worst financial crisis since FDR, but kept the bailouts going. And when it comes to investigating the banks' practices and putting regulations in place to avoid another crisis, the administration has essentially kicked the can down the road. Obama has postured that he's going to look into prosecuting the banks, but nothing has come of this boast. The Volcker Rule was imposed, but the monstrosity that is the banking lobby has managed to take the teeth right out of it. After all, they have five lobbyists for each member of congress.
Just this week, JP Morgan announced that they just made another $2 billion dollar trading loss. How did this happen? Easy! There was nothing in place to stop them from doing it. Now there is fallout everywhere and JP Morgan CEO Jamie Dimon is doing all he can to spin this in the press coverage. He claims that they will "learn from their mistakes" but he should have "learned" this lesson in 2008. How many mulligans can we give him? He has been a staunch opponent of regulation, but we can clearly no longer let the mental patients run the asylum. We Americans need to shed our apathy and hold our financial institutions and government accountable to these egregious practices. It's time to wake up, America!