Are the people of our country going to forget what caused the economic downfall and stand with the right wingers again? I don’t really sense that the Republican’s popularity is increasing. What is happening though is that Obama’s numbers have slipped. He has been president for only eight months now and people have started to abandon him. It is amazing how quickly people forget. Eight years of Bush did massive damage to our country. Obama inherited the worst economic crisis since the great depression. Our credit markets were frozen. Bear Stearns and Lehman Brothers had already gone under and most of the rest of our Wall Street banks were in severe trouble. There was a sense of panic in the financial community. Obama pumped a lot of money into our financial system and averted the pending catastrophe. We still have a way to go for recovery but our economic system is stable. The problem is that the people don’t seem to give Obama any credit for the financial system rescue and his favorability rating has decreased.
From the beginning of the economic downturn, the Republican “spin machine” has tried to deflect the blame. Most of these attempts sounded silly. The Republicans had been in control for eight years and set our countries policies. The Democrats had been able to derail a few circuit court justice appointments but the Republicans got their way on policy matters. The agenda was straight out of the Reagan playbook. Massive upper ended tax cuts and deregulation was the policy. Most economists blame these core Republican policies as the major cause of the collapse. Fighting for their survival, Republicans have tried to spread blame to Democrats. There was an attempt to blame loans to inner city Black people as the cause. It didn’t work this time and even sounded silly. A “you tube” video surfaced that showed Barney Frank opposing a Republican Fannie Mae reform in 2006 and it accused Frank of stopping the reform. The problem with this for the Republicans is that they had a majority in the House in 2006 and didn’t need Frank’s vote for the reform. The Republicans failed to act and it wasn’t Frank’s fault. In 2007 when the Democrats took control of the House, Fannie Mae was reformed as one of their first acts. Of course, after the 2008 collapse, Fannie Mae & Freddie Mac were completely taken over by the government. The Republicans also went back to their old reliable scapegoat and tried to blame it all on Bill Clinton. In 1999, Clinton supported the Republican legislation that repealed the Glass Steagall Act. This enabled the banks to take more risk and contributed to the collapse. But, to blame the whole thing on Clinton is ridiculous. The repeal was right out of the Reagan playbook. Clinton did sign this ill thought legislation into law but how can he accept all the blame when what he agreed to was core Republican legislation. Many Republicans still support tax cuts and deregulation as the solution. They still support these failed policies. The key question is are they now starting to win the people back to their position?
The economic collapse of 2008 was caused by irresponsible risk taking by our Wall Street Banks. It was driven by greed. In an attempt to stimulate the economy, Greenspan kept our interests rates very low for a long period of time. This sparked a house buying and mortgage refinancing binge. Wall Street banks bought packages of loans. Some of the loans were sub-prime which were extremely risky. The banks repackaged these loans. These packages were classified as Class A debt even though many of the packages contained a high percentage of sub prime loans. These debt packages were sold all over the world. The Wall Street Banks had more buyers of these risky debt packages than they could provide. They encouraged the real estate industry to make even more and riskier loans. Fannie Mae and Freddie Mac were losing market share because they still had some regulations that they had to follow. To keep up with the Wall Street Banks, Fannie & Freddie loosened their rules and joined the party. Note – Fanny and Freddy did not cause the collapse but did join the “irresponsible risk crowd” after the party had started. A huge real estate bubble formed. The risky transactions were even made riskier with Credit Default Swaps. Credit Default Swaps were basically side bets on the transaction that were made by the banks with Zero oversight.(the repeal of Glass Steagall Act enabled this) About 60 trillion dollars of Credit Default Swaps were in circulation at the time of the 2008 collapse. This is about 4 times our yearly GDP. When the real estate bubble burst the whole economic system collapsed like a house of cards.
For our country’s future survival, I hope that the people are able to remember what happened. Our president is intelligent, capable, caring, a genuine “nice guy”, and is working his butt off for us. Let’s give him a chance. The chorus of an old song by the rock group Steppenwolf is going through my head. It goes, “American, where are you now? Don’t you care about your sons and daughters? Don’t you know? We need you now. We can’t fight alone against the monster.” I think these lyrics are telling of our current situation.
Bruce Bones has a diverse range of experience. His latest venture is in Internet Marketing.