The Crime of the Great Recession

The Great Recession is the direct result of self-serving actions taken by the financial industry, the government, the media and American homebuyers. An unconscious conspiracy of self-interest wreaked financial devastation. Former fed chairman Alan Greenspan, explaining his support of deregulation, admitted error in believing self-interest would lead companies to minimize risk in order to preserve themselves. He did not balance that impulse against the motives of commission driven traders and brokers who cared not if their company or the country survived the cynical processes that earned their massive bonuses.

The wisdom of the marketplace was compromised by misinformation that real estate prices would rise forever. The false premise was repeated until it became common financial wisdom. Homebuyers, assured of dramatic short term increases in their property value, were thrilled to get an easy deal. The quick buck artists in the mortgage companies and investment banks were ready to supply those deals and reap the massive commissions and fees that came with high volume lending. The government, in the thrall of conservative deregulators, did nothing as widespread abuse ate into the nation’s economic well being.

Inevitably, as real estate prices fell and mortgages defaulted financial institutions found themselves holding “toxic” assets.. Some banks and investment companies failed. The Lehman Brothers collapse alerted the world the entire financial system was about to collapse.

Along c ame Treasury Secretaries Henry Paulson and Timothy Geitner to save the day. . .for the financiers. After a line of Treasury Secretaries who were investment bankers, some may wonder why the President always chooses the Secretary of Treasury from the banking industry. Now we know. When they had nearly destroyed the economy, with no consideration of other strategies, people they knew gave the investment bankers money from the U.S.Treasury. The financial industry was saved. They were the only ones.

A far stricter approach was applied to the auto industry, which was barely given a lifeline with no implication of continuing aid.

With unpaid mortgages at the root of toxic assets the government might have intervened massively to help pay mortgages and solve the problem at its root. A halfhearted attempt has resulted in some inadequate programs, which have helped only a few. The financial industry was saved. A small number became very wealthy. The rest of the nation suffered grievious losses. That is a crime.