If Americans had been consulted about the 2008-2009 Wall Street bailout, I doubt it would have happened the way it did. At the very least, strict conditions would have been placed on the banks in return for the money. The banks would have had to eat the losses of the predatory mortgages they sold, and help homeowners reduce those mortgages. They’d be required to improve the capitalization of small banks in communities across the country. They’d be forced to accept stringent new regulations, including resurrection of Glass-Steagall.
But Americans weren’t really consulted. It was an inside job.
As a result, Wall Street has prospered but the rest of the nation hasn’t. One out of four homeowners is underwater, owing more on their homes than the homes are worth.
And with the worst economy since the Great Depression, we’re now embarking on fiscal austerity. Either Congress’s super-committee comes up with $1.2 trillion of federal budget cuts that Congress agrees to—going into effect a little over thirteen months from now—or $1.5 trillion of cuts are made across the board. Meanwhile, states and cities have been slashing public services for the past three years.
So which is it? Rule by democracy or by financial markets? Based on what’s happened in America, I’d choose the former.
- Robert Reich, Greece’s Choice—and Ours: Democracy or Finance?
Reich thinks the Greeks should default, and we should let the banks go hang, which is what we might have done back in 2008-2009 if anyone had asked us.
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