Many believe the roots of the financial crisis began when the Glass-Steagall act of 1933 was repealed by the Gramm–Leach–Bliley Act of 1999. This allowed securities activities and affiliations between commercial banks and securities firms. The hope was that the money made on such affiliations would trickle down to everyone and strengthen the economy.
As I’ve mentioned before, “trickle down economics doesn’t work.” All one has to do is look at the shrinking middle class as corporations who are now counted as people continue to widen the economic disparity in America.
What did members of the financial elite believe before 2007. Here are some emails. This one from a Standard and Poor’s employee.
“Let’s hope we are all wealthy and retired by the time this house of card falters.”
Here’s an email from Thomas Mannix.
‘We believe that the loans that Lehman originated in 2005 and 2006 through the captive volume were originated under relaxed standards (i.e.at Aurora) and that the residuals retained from these securitizations may come back to haunt Lehman.’
So these folks knew of the impending crisis and did nothing about it except make money and place a large number of Americans at risk. Most if not all should be in jail.
There is on politician who appears up to the challenge. Elizabeth Warren was the principal architect of the U.S. Consumer Financial Protection Bureau. A bureau so unpopular with Republicans that they refused to confirm her as its leader. So, she turned around and ran for U.S. Senator from Massachusetts and won. In the senate she has been a thorn in the side of financial institutions that do not meet basic regulatory requirements. She is also a supporter of a second Glass-Steagall type of bill to further protect consumers.
Here is a quote from Ms. Warren.
“There is nobody in this country who got rich on their own. Nobody. You built a factory out there – good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory… Now look. You built a factory and it turned into something terrific or a great idea – God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”
Warren seems to have a solid grasp of the disparities in our current financial climate. However, two problems remain. One, when will Republicans end their infatuation with the rich and understand you build a solid financial sector from the bottom up? Two, will the Democrats show the courage of their beliefs and fight for a system that is fair for all? If those two scenarios do not happen, Ms. Warrens courageous attempts to change the way America does business may be for naught.