Yeah, my category of people who have established themselves swings older for obvious reasons, but it’s certainly not the case that all seniors are a part of it. One result of real estate values (driven in part by interest rates), though, is that many people had the chance to acquire property when it was affordable to the middle class that has since become fantastically valuable. If my spouse’s parents had kept the home they lived in when she was born, they’d be rich now. Not everyone had that opportunity.
I thought about it some more and what really grinds my gears about interest rates is that they are set by technocrats. I can’t think of an argument for having an independent treasury setting interest rates that couldn’t be made for having an independent body that sets tax rates or an independent body that sets healthcare spending. There are tons of public policy issues of huge importance, interest rates are just one of them. And that’s allowed central bankers to build up a special mystique around themselves as gurus when the reality is that I don’t think anyone really understands the full implications of higher and lower interest rates (really I feel like people don’t understand even at a really basic level; case in point, people think that low interest rates make it easier to buy real estate!).
Of course if I do a quick google search I find that people who think we should do away with central bank independence are right-wing think tanks who clearly want to do away with it so they can make things even stupider. But the fact that we keep voting for kleptocrats is it’s own problem.
Sounds great, except that the alternative decision not to bail would have likely led to another Great Depression. And do remember GWB started the rescue Obama continued, this was a rare bipartisan government action, though the GOP likes to whitewash that, like most pesky facts. The bailout should have, and did come with a pile of regulation (not enough), which of course is now being dismantled. But they should not have been able to buy T-bills with the zero interest loans from the Fed. That was simply stealing taxpayer money.
If radical action was needed, they didn’t need to choose the radical action that was most beneficial to the people who caused the problem in the first place. If you don’t count the top 10% richest people, there was a depression. In the first few years after 2008 more than 100% of the recovery was captured by the top 10%. Median wages have only reached 2008 levels in 2016, and they were still below 2000 levels. If the point of the bank bailout was to save the economy, it failed.
If the collapse of a bank would truly do catastrophic damage to the lives of too many people and that cannot be allowed to happen, then nationalize the bank and oversee the winding down of it’s operations responsibly, allowing everyone time to sever their business with the bank in a non-destructive way. Retroactively separate the commercial and investment banking sides and don’t let the investment creditors eat up all the assets.
And for fuck’s sake, arrest people for fraud they committed.
Think of it like cleaning up after an Earthquake. Step one is to try to save lives, not to make sure the people who intentionally caused the Earthquake profit by doing so.
The whole system is interconnected in a lot of ways, and the damage that was done by defrauding people with toxic mortgage backed assets (as well as convincing people to take mortgages they couldn’t afford to create more mortgage backed assets) was real damage that needed to be repaired. I feel like the bailout instead just kept everything as normal as possible. It strikes me that a huge amount of nominal value was lost when the housing market collapsed, and the effort ought to have been in preventing that nominal loss from turning into real loss (e.g. foreclosures which take a productive asset [a roof over a family’s head] and turn it into an unproductive one [an elaborately decorated vacant lot]). The problem is that when stocks collapse, the money is extracted from the mouths of the poor, not from the high scores of the rich. I’m not sure I know what the right solution was, but I think the bailout was a transparently bad one, and that it worked out badly.
Why is this always presented as a binary decision? So I think we are broadly on the same page - judging from the rest of your para. But I take issue with the idea that we needed to bail out banks with no strings attached access to vast federal funds and the Fed window. Why not attach strings?
Why were senior management not forced out? Why were they not forced to lose deferred compensation? Why werent equity stakes taken to dilute existing holders and the banks “rehabed” and then refloated? Why were MS and GS allowed to switch status to bank holding companies and given immediate access to the Fed window without senior management being forced to leave?
None of this made sense and there is no precedent for it. A giant public sector give-away done at non-market prices for no reason other than to make sure that rich failures would stay rich.
And the ultimate cost of it is the de-legitimization of US capitalism itself. The central element of US capitalism - the groups given custody of the currency - ie the right to “magic” money into existence, were bailed out on preferential terms at the expense of the public after they had totally destroyed the financial system through incompetence and greed. As if they didn’t have enough privileges already.
Feel free to explain why the bailout had to be on the softest terms imaginable. Maybe taxpayers should have given them extra money to salve their hurt feelings? Perhaps the interest rate should have been negative? Heaven forbid that senior directors, equity holders or subordinated debt holders should face even more substantial losses when there are still poor people to tax.
