Five years ago the wheels came off the financial system in our country. The risk-taking and gambling with other people’s money caught up with the financial giants who ruled the economic roost. This collapse grew out of the 2001 recession. The policy of then-President Bush and the GOP-controlled Congress and Senate was to lower taxes, at any excuse, especially on the wealthy and especially on income for which you didn’t work. Instead of investing in our domestic economy, our resources went to two wars. The tax bonuses to the wealthy didn’t trickle down to the rest of us (nor were they intended to), so family income stagnated. I don’t need to tell you this — you can look at your own earnings and those of your friends, family, and neighbors.
How do you move an economy along when middle class income is stagnant? You create money, through accelerating and artificial increases of housing values. Urged on by mortgage companies and the big banks, these housing values fed on themselves, pushing up prices, getting people to take out second loans and use those for spending money, assured by the banks and the President that as long as housing prices kept going up, their credit was good. That’s how America built our consumer market in the first decade of the 21st century — on the hopes of plastic.
You might remember a Seattle-based bank called Washington Mutual. WaMu went crazy, giving out loans to anyone who wanted to buy a house, and then re-selling those loans like hot potatoes. But those chickens came home to roost, with WaMu assets vaporizing and the bank going bankrupt.
In 2008, Wall Street was at the end of its rope. And as the housing market crumbled, people stopped buying stuff, the economy went into a tail spin, jobs disappeared, and unemployment jumped up into the double digits.
Looking around, we can observe who was hurt by the 2008 crash. My younger colleagues bought their first homes in 2007. We all considered this a responsible thing to do, part of joining the middle class and raising a family. My colleagues are still underwater, with the value of their homes far less than their mortgages.
People my age who lost their jobs remain unemployed, finding themselves competing with people 25 years younger than them in the job market. High school students who aspire to college are confronted with the cost of higher education, made much worse as the state has chopped funding for higher education and replaced that with higher and higher tuition. The solution for these students — go deep into college debt.
Overall, wages as a share of national income have fallen 10 percent in the past 40 years. Meanwhile, corporate profits have doubled since 2000. Of these corporations, the big banks have done the best. When toxic assets threatened to take down their operations in 2008, President Bush and Congress provided the bailout funds to save them. In 2009, President Obama and Congress continued this bailout. All told, our government lent over $10 trillion at below market interest rates to the banks. That’s trillion with a “T”. Now financial sector profits are gobbling up a fifth of total corporate profits — $50 billion in profits just in the past three months for the big banks.
As the biggest welfare recipients in the history of our country, these banks have gained political power. They can ignore the long-term consequences of bad risk taking, knowing that before they fail, they will be bailed out. They can lean on government in their times of crisis and make off with tremendous profits once the crisis is averted.
Enough is enough. It’s time to turn around our priorities and protect families, not bankers. Let’s fund family leave insurance so workers can care for their newborn children.
The Legislature could make paid sick days the law, so that when you are sick, you don’t have to choose between your health and your income. We could close tax loopholes enjoyed by the banks and use the money to reduce class sizes in kindergarten and reduce tuition in community college. Let’s support the students, and families, and wage earners. Let’s make the banks work for us, not have us work for the banks. WaMu is gone. Now it is our turn.
Originally published at the Everett Herald