Centered in the systemic abuse of the housing markets, the 2008 financial crisis was the culmination of the greatest financial swindle in human history. Yet three years later, little has been done to punish the offenders or prevent a reoccurrence. The Dodd-Frank Wall Street Reform and Consumer Protection Act, sponsored by two of the financial industry's greatest apologists, accomplished little other than diversion. Most of the major institutional participants in the financial debacle continue to operate -- many bolstered by hundreds of billions of dollars of federal financial support. Few of the individual perpetrators have been prosecuted. Some have quietly retired (including Dodd and Frank) or moved on to lesser profile positions. An extraordinary number continue to occupy high elected and appointed public office as well as prominent private sector board, advisory, and executive positions. That so many have gone unpunished or unrecognized and continue to hold positions of public and private trust is a sad commentary on our current state of justice and public morality.
In 1990, financier Michael Milken was convicted of "parking" violations (aiding clients in hiding the amount of their ownership of public securities). He was sentenced to ten years in prison, banned for life from the securities industry, and fined $600 million. His firm Drexel Burnham Lambert was fined an additional $500 million and forced into liquidation. The government calculated the cost to the public of Milken's crimes at $685,000.
The 2008 housing meltdown produced multi-trillion dollar world-wide financial losses, devastated the retirement and savings accounts of tens of millions of families, and dimmed the economic prospects of a generation of young Americans. It involved dereliction of fiduciary responsibility, fraud, and corruption on an unprecedented scale. Yet, only a handful of people were prosecuted or even fired among those responsible -- the legions of brokers, mortgage originators, investment and commercial banks, rating agencies, accounting and legal firms, federal and state regulators, elected and appointed federal, state, and local officials, and quasi public institutions like Fannie Mae and Freddie Mac.
In 2010 the Tea Party had success mobilizing Americans unhappy with the state of the country but specifically concerned about the unsupportable expansion of federal government spending. Identifying elected officials in general as the principal cause and Democrats in particular as "the party of government," the movement catalyzed an unprecedented congressional turnover (96 new Republicans against 10 new Democrats). While the country may benefit from clearing out some of this elected dead wood and more responsible budgeting may result, the acknowledged growth in government spending had precious little to do with creating the financial crisis that is the principal source of our national discontent.
During the past year, the Occupy Wall Street movement hit closer to the mark by identifying the causal relationship between the 2008 financial crisis and the resulting financial and job losses, and diminished prospects for individual economic opportunity. Democrats were quick to embrace the movement presuming that Republicans as "the party of business" would be principally disadvantaged. However, Democrats have scrupulously avoided making more specific connections between the actions of the political class and the 2008 debacle. Having benefitted at least as much as Republicans from the patronage provided by the perpetrators of the crisis, Democrats as the principal advocates for increasing home ownership and lower community based lending standards could be vulnerable to charges of having instigated the crisis in the first place.
Since both parties are equally culpable for failing to avoid the excesses that led to the 2008 meltdown, it appears that the 2012 election will be fought on safer ground. Democrats will shift the conversation away from the actions of the political class and the culpability of Wall Street and its enablers to the more traditionally hospitable terrain of class division. Issues of "income inequality" and "tax fairness" may or may not be political winners but will leave unaddressed the implications of our growing and unsupportable government deficits and do little to address the damage done by the financial crisis or our vulnerability to another one. Similarly Republicans will complain about the level of government spending and the need for less job killing regulation while avoiding the calamitous results produced by past unrestrained financial manipulation in the private sector.
Washington has at last reached bipartisan agreement: neither party sees benefit from further investigating the causes of the crisis or making the substantive changes necessary to prevent a reoccurrence. The institutional structures that led to the 2008 crisis remain largely in place and many of the people most responsible maintain positions of power. After suffering multi trillion dollar financial losses in pensions and housing values, three years of multi-trillion dollar federal government deficits and the resulting loss of its AAA credit rating, the country is in far worse position to weather another crisis or honor its rising future benefit obligations. Unless we address the causes of our last crisis, root out the enablers and profiteers in both the private and public sectors who perpetrated it, and correct the imbalance in a government that spends close to twice what it collects, we won't have much left worth occupying.