Sometimes you don’t know how deep the hole is until you try to fill it. In 2009, staring down what looked to anyone with a calculator like the biggest financial crisis since 1929, the federal government poured $830 billion into the economy — a spending stimulus bigger, by some measures, than the entire New Deal — and the country barely noticed.
It registered the crisis, though. The generation that came of age in the Great Depression was indelibly shaped by that experience of deprivation, even though what followed was what Henry Luce famously called, in 1941, “the American Century.” He meant the 20th, and, to judge from our present politics, at least — “Make America Great Again” on one side of the aisle; on the other, the suspicion that the president is a political suicide bomber, destroying the pillars of government — he probably wouldn’t have made the same declaration about the 21st. A decade now after the beginning of what has come to be called the Great Recession, and almost as long since economic growth began to tick upward and unemployment downward, the cultural and psychological imprint left by the financial crisis looks as profound as the ones left by the calamity that struck our grandparents. All the more when you look beyond the narrow economic data: at a new radical politics on both left and right; at a strident, ideological pop culture obsessed with various apocalypses; at an internet powered by envy, strife, and endless entrepreneurial hustle; at opiates and suicides and low birthrates; and at the resentment, racial and gendered and otherwise, by those who felt especially left behind. Here, we cast a look back, and tried to take a seismic reading of the financial earthquake and its aftershocks, including those that still jolt us today.
AMERICA STOPPED BELIEVING IN THE AMERICAN DREAM
by Frank Rich, NY Magazine Columnist
If you were standing in the smoldering ashes of 9/11 trying to peer into the future, you might have been overjoyed to discover this happy snapshot of 2018: There has been no subsequent major terrorist attack on America from Al Qaeda or its heirs. American troops are not committed en masse to any ground war. American workers are enjoying a blissful 4 percent unemployment rate. The investment class and humble 401(k) holders alike are beneficiaries of a rising GDP and booming stock market that, as measured by the Dow, is up some 250 percent since its September 10, 2001, close. The most admired person in America, according to Gallup, is the nation’s first African-American president, a man no one had heard of and a phenomenon no one could have imagined at the century’s dawn. Comedy, the one art whose currency is laughter, is the culture’s greatest growth industry. What’s not to like?
Plenty, as it turns out. The mood in America is arguably as dark as it has ever been in the modern era. The birthrate is at a record low, and the suicide rate is at a 30-year high; mass shootings and opioid overdoses are ubiquitous. In the aftermath of 9/11, the initial shock and horror soon gave way to a semblance of national unity in support of a president whose electoral legitimacy had been bitterly contested only a year earlier. Today’s America is instead marked by fear and despair more akin to what followed the crash of 1929, when unprecedented millions of Americans lost their jobs and homes after the implosion of businesses ranging in scale from big banks to family farms.
It’s not hard to pinpoint the dawn of this deep gloom: It arrived in September 2008, when the collapse of Lehman Brothers kicked off the Great Recession that proved to be a more lasting existential threat to America than the terrorist attack of seven Septembers earlier. The shadow it would cast is so dark that a decade later, even our current run of ostensible prosperity and peace does not mitigate the one conviction that still unites all Americans: Everything in the country is broken. Not just Washington, which failed to prevent the financial catastrophe and has done little to protect us from the next, but also race relations, health care, education, institutional religion, law enforcement, the physical infrastructure, the news media, the bedrock virtues of civility and community. Nearly everything has turned to crap, it seems, except Peak TV (for those who can afford it).
That loose civic concept known as the American Dream — initially popularized during the Great Depression by the historian James Truslow Adams in his Epic of America — has been shattered. No longer is lip service paid to the credo, however sentimental, that a vast country, for all its racial and sectarian divides, might somewhere in its DNA have a shared core of values that could pull it out of any mess. Dead and buried as well is the companion assumption that over the long term a rising economic tide would lift all Americans in equal measure. When that tide pulled back in 2008 to reveal the ruins underneath, the country got an indelible picture of just how much inequality had been banked by the top one percent over decades, how many false promises to the other 99 percent had been broken, and how many central American institutions, whether governmental, financial, or corporate, had betrayed the trust the public had placed in them. And when we went down, we took much of the West with us. The American Kool-Aid we’d exported since the Marshall Plan, that limitless faith in progress and profits, had been exposed as a cruel illusion. (...)
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WTF HAPPENED?
by Sheila Bair, Former head of FDIC
Once the system was stabilized in early 2009, we had an opportunity to restructure and break up Citigroup in particular, but we didn’t do that. I think that was a missed opportunity. We just reinforced too-big-to-fail with all these bailouts, let’s face it. Other than Lehman Brothers, nobody took their medicine. Restructuring Citigroup would have sent a powerful signal that the government had the gumption and courage to stand up to these very large institutions, and to impose losses on bond holders.
I think we’ve improved the system on the margin. There are higher capital requirements, there’s better bank liquidity, less reliance on short-term financing, less reliance on debt among the regulated banks. Those are all positive things. But the financial system we have is still basically the financial system we had in 2008, with more capital and less reliance on short-term funding, so whether it’s enough? I hope it is.
I wish we had more Republicans who would stand up to these cronies who want the government bailouts. I think a lot of people still want that on Wall Street — it’s secretly what they want. They think it’s the government’s obligation to keep them afloat. I’m a capitalist, and I’d rather have the state own them than have that system.
It’s very frustrating. It’s just stupid economics. Set the morality aside; it’s just dumb economics to have a system like this where you’re propping up inefficient, bloated institutions. So there are good economic reasons to not have the system we had in 2008, and whether we’ve gotten rid of it or not I don’t know. I think we won’t know until a big bank gets in trouble again. Then we’ll see what happens. I don’t even want to think about what the political fallout would be. (...)
by Yves Smith, Founder, Naked Capitalism
It registered the crisis, though. The generation that came of age in the Great Depression was indelibly shaped by that experience of deprivation, even though what followed was what Henry Luce famously called, in 1941, “the American Century.” He meant the 20th, and, to judge from our present politics, at least — “Make America Great Again” on one side of the aisle; on the other, the suspicion that the president is a political suicide bomber, destroying the pillars of government — he probably wouldn’t have made the same declaration about the 21st. A decade now after the beginning of what has come to be called the Great Recession, and almost as long since economic growth began to tick upward and unemployment downward, the cultural and psychological imprint left by the financial crisis looks as profound as the ones left by the calamity that struck our grandparents. All the more when you look beyond the narrow economic data: at a new radical politics on both left and right; at a strident, ideological pop culture obsessed with various apocalypses; at an internet powered by envy, strife, and endless entrepreneurial hustle; at opiates and suicides and low birthrates; and at the resentment, racial and gendered and otherwise, by those who felt especially left behind. Here, we cast a look back, and tried to take a seismic reading of the financial earthquake and its aftershocks, including those that still jolt us today.AMERICA STOPPED BELIEVING IN THE AMERICAN DREAM
by Frank Rich, NY Magazine Columnist
If you were standing in the smoldering ashes of 9/11 trying to peer into the future, you might have been overjoyed to discover this happy snapshot of 2018: There has been no subsequent major terrorist attack on America from Al Qaeda or its heirs. American troops are not committed en masse to any ground war. American workers are enjoying a blissful 4 percent unemployment rate. The investment class and humble 401(k) holders alike are beneficiaries of a rising GDP and booming stock market that, as measured by the Dow, is up some 250 percent since its September 10, 2001, close. The most admired person in America, according to Gallup, is the nation’s first African-American president, a man no one had heard of and a phenomenon no one could have imagined at the century’s dawn. Comedy, the one art whose currency is laughter, is the culture’s greatest growth industry. What’s not to like?
Plenty, as it turns out. The mood in America is arguably as dark as it has ever been in the modern era. The birthrate is at a record low, and the suicide rate is at a 30-year high; mass shootings and opioid overdoses are ubiquitous. In the aftermath of 9/11, the initial shock and horror soon gave way to a semblance of national unity in support of a president whose electoral legitimacy had been bitterly contested only a year earlier. Today’s America is instead marked by fear and despair more akin to what followed the crash of 1929, when unprecedented millions of Americans lost their jobs and homes after the implosion of businesses ranging in scale from big banks to family farms.
It’s not hard to pinpoint the dawn of this deep gloom: It arrived in September 2008, when the collapse of Lehman Brothers kicked off the Great Recession that proved to be a more lasting existential threat to America than the terrorist attack of seven Septembers earlier. The shadow it would cast is so dark that a decade later, even our current run of ostensible prosperity and peace does not mitigate the one conviction that still unites all Americans: Everything in the country is broken. Not just Washington, which failed to prevent the financial catastrophe and has done little to protect us from the next, but also race relations, health care, education, institutional religion, law enforcement, the physical infrastructure, the news media, the bedrock virtues of civility and community. Nearly everything has turned to crap, it seems, except Peak TV (for those who can afford it).
That loose civic concept known as the American Dream — initially popularized during the Great Depression by the historian James Truslow Adams in his Epic of America — has been shattered. No longer is lip service paid to the credo, however sentimental, that a vast country, for all its racial and sectarian divides, might somewhere in its DNA have a shared core of values that could pull it out of any mess. Dead and buried as well is the companion assumption that over the long term a rising economic tide would lift all Americans in equal measure. When that tide pulled back in 2008 to reveal the ruins underneath, the country got an indelible picture of just how much inequality had been banked by the top one percent over decades, how many false promises to the other 99 percent had been broken, and how many central American institutions, whether governmental, financial, or corporate, had betrayed the trust the public had placed in them. And when we went down, we took much of the West with us. The American Kool-Aid we’d exported since the Marshall Plan, that limitless faith in progress and profits, had been exposed as a cruel illusion. (...)
Read more:
WTF HAPPENED?
by Sheila Bair, Former head of FDIC
Once the system was stabilized in early 2009, we had an opportunity to restructure and break up Citigroup in particular, but we didn’t do that. I think that was a missed opportunity. We just reinforced too-big-to-fail with all these bailouts, let’s face it. Other than Lehman Brothers, nobody took their medicine. Restructuring Citigroup would have sent a powerful signal that the government had the gumption and courage to stand up to these very large institutions, and to impose losses on bond holders.
I think we’ve improved the system on the margin. There are higher capital requirements, there’s better bank liquidity, less reliance on short-term financing, less reliance on debt among the regulated banks. Those are all positive things. But the financial system we have is still basically the financial system we had in 2008, with more capital and less reliance on short-term funding, so whether it’s enough? I hope it is.
I wish we had more Republicans who would stand up to these cronies who want the government bailouts. I think a lot of people still want that on Wall Street — it’s secretly what they want. They think it’s the government’s obligation to keep them afloat. I’m a capitalist, and I’d rather have the state own them than have that system.
It’s very frustrating. It’s just stupid economics. Set the morality aside; it’s just dumb economics to have a system like this where you’re propping up inefficient, bloated institutions. So there are good economic reasons to not have the system we had in 2008, and whether we’ve gotten rid of it or not I don’t know. I think we won’t know until a big bank gets in trouble again. Then we’ll see what happens. I don’t even want to think about what the political fallout would be. (...)
by Yves Smith, Founder, Naked Capitalism
Trump is crowing about this 4.1 percent GDP growth, right? Yet if you look at the statistics, real worker wages have continued to be flat for this period. The crisis itself was the greatest looting of the public purse in history. The crisis itself was a huge wealth transfer. The Obama administration should have forced a lot more recognition of the losses. These losses were real. They should have forced more loan write-downs. And recognition of the loss to the financial system. And they should have had a huge stimulus to offset the downdraft of recognizing those losses. And in fact the Japanese, early in their crisis, they said the biggest mistake we made was not writing down the bad loans in the banking system. Don’t repeat our mistake.
And we did this in a more indirect manner by having the Fed engineer these super-low interest rates that were a transfer from savers to the financial system. Economist Ed Kane said that basically savers lost $300 billion in income a year. So that reduction of income right there, you see today. There’s a Wall Street Journalstory about how pension funds are in crisis. There’s not a single mention of the fact that the zero-interest-rate policies are the reason why the pensions are in distress. All retirees and long-term savers, life insurance, they’re all in the same boat. It used to be that if you were a saver or an asset holder, you could get a decent positive return doing something not crazy. And the Fed took that away. The big reason the pensions are in crisis is because the way we dealt with the crisis.
We have this fallacy that normal people should be able to save for retirement. If public pension funds, which can invest at the very lowest possible fees, can’t make this work, how is Joe Mom-and-Pop America gonna be able to do this? Again, it’s back to the stagnant worker wages. So, great, we’re not paying people enough, housing prices are very inflated. We’ve got this horrible medical system that costs way too much, and how are people supposed to put any money aside when their real estate and their rents and their health costs are going up?
Why do you think we have Trump? I mean, even though he did a big bait-and-switch, as we all know, there were a lot of people that lost their homes, their community wasn’t what it used to be, particularly if they lived in the Rust Belt. And then you have these people on the coast saying, “Oh, they should go get training. It’s disgusting.” I mean, let them eat cake is let them get training. What you hear from these coastal elites: People over 40, even over 35, are basically non-hirable. Are you gonna train them? They’re gonna waste their time thinking they can get a new job? I mean, that’s just lunacy.
I think the Republicans, because they’re sort of loud and proud, that’s the way they behave, it’s easier to point fingers at them. And in some sense they are more vocal proponents of bad ideology, but there’s this great tendency in politics and in business to present whatever was done as being terrific and successful when it wasn’t. This is one of my criticisms of the Obama administration, but now appears to be true of the Democratic Party generally, that they think the solution for every problem is better PR.
And we did this in a more indirect manner by having the Fed engineer these super-low interest rates that were a transfer from savers to the financial system. Economist Ed Kane said that basically savers lost $300 billion in income a year. So that reduction of income right there, you see today. There’s a Wall Street Journalstory about how pension funds are in crisis. There’s not a single mention of the fact that the zero-interest-rate policies are the reason why the pensions are in distress. All retirees and long-term savers, life insurance, they’re all in the same boat. It used to be that if you were a saver or an asset holder, you could get a decent positive return doing something not crazy. And the Fed took that away. The big reason the pensions are in crisis is because the way we dealt with the crisis.
We have this fallacy that normal people should be able to save for retirement. If public pension funds, which can invest at the very lowest possible fees, can’t make this work, how is Joe Mom-and-Pop America gonna be able to do this? Again, it’s back to the stagnant worker wages. So, great, we’re not paying people enough, housing prices are very inflated. We’ve got this horrible medical system that costs way too much, and how are people supposed to put any money aside when their real estate and their rents and their health costs are going up?
Why do you think we have Trump? I mean, even though he did a big bait-and-switch, as we all know, there were a lot of people that lost their homes, their community wasn’t what it used to be, particularly if they lived in the Rust Belt. And then you have these people on the coast saying, “Oh, they should go get training. It’s disgusting.” I mean, let them eat cake is let them get training. What you hear from these coastal elites: People over 40, even over 35, are basically non-hirable. Are you gonna train them? They’re gonna waste their time thinking they can get a new job? I mean, that’s just lunacy.
I think the Republicans, because they’re sort of loud and proud, that’s the way they behave, it’s easier to point fingers at them. And in some sense they are more vocal proponents of bad ideology, but there’s this great tendency in politics and in business to present whatever was done as being terrific and successful when it wasn’t. This is one of my criticisms of the Obama administration, but now appears to be true of the Democratic Party generally, that they think the solution for every problem is better PR.
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by Frank Rich, Sheila Bair, Corey Robin, Robert Shiller, Matt Bruenig, Yves Smith, Boots Riley, Steve Rattner, Astra Taylor, Paul Romer, Stephanie Kelton (and Others), NY Magazine | Read more:
Image: uncredited
